Quality Stocks should be the Focus of Investors!
The Bourses not only in India but also world over is quite funny and paradoxical. Adam Smith said Human beings are social animals and hence the place where they play is quite unpredictable. The Humans are forward looking, so also the markets. It is funny because the market is worried about what is going to happen in future. In March worried about the future the great sell-off came in. The devil- Covid ‘ 19 did unleash the animal spirit in humans. The western economies as well Asian giants like Japan and China liberally unfolded monetary and fiscal incentives, quite unprecedented in the history of human kind…not even during the great depression in the beginning of the last century. This stimulus is going to find its way into asset prices and stock markets and that is what we witness today.. huge surge, chasing assets irrespective of valuation and costs per se. Hence no wonder the markets become ferocious and goes into the tight grip of Bulls although Indian government has been quite conservative in terms of stimulus.
But in India, there will be a limited impact of all this as we come out of these lockdowns and as the infection spreads. Eventually the population as a whole will acquire herd immunity. In the near term, we have had a very big rally and I find the market a bit overheated? Yes it is. Can it correct a few hundred points from here? Yes it can. Should you get very cheeky about it and try and trade it? Well, that depends on what your investment horizon is and what your investing style is.
The view is that if a correction comes along, you got to be prepared to put money to work because there is a lot more to go before this market peaks out and this is really not an India centric view, it is a global view. India, in fact, has under performed emerging markets since the start of the year and it is continuing to struggle against emerging markets on a relative basis and we will come to that a little later in our conversation.
How much do you feel the spread is widening? People are more willing to look for quality stocks across the board vis-à-vis those handful of preferred names that continue to be the leaders in the market. Reliance is a great example.
It is spreading out everywhere in the world. It will spread out in India and one can sense that it has already started to spread out. You are going to get more and more days in which the so-called value stocks outperform quality and the broad market outperforms the narrow market.
So investors are well advised to avoid the herd mentality and desist from emotional buying based on occasional buoyancy in some unknown stocks as they may be in the hands of market operators who will leave us into lurch; Instead go in for well known, track record based quality stocks.
We wish you value-investing to reap benefits!
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