Steep Fall in Indices – Stay calm

Here is a quick round up – of the bad news:

  • Sensex is 17% down from November 2010 peaks. Particularly second half of Jan onwards, fall has been steep
  • Sensex is below its 200 Day Moving Average – DMA
  • FIIs are withdrawing funds from India. After investing $28 billion plus in 2010 they have now taken off $1.5 billion in 2011
  • Sensex represents large caps. Mid caps and small caps have fallen harder
  • A series of scams and bad news has hit us recently.
    • Telecom sector scam. Real estate loans scam. MFI sector bad news. Commonwealth Games scam.
    • High inflation. Soaring agriculture prices. Rising oil prices. Even other commodities are costlier. Metals. Energy.
    • Egypt and Tunisia have erupted and there is unrest here.

So what does an investor do? Calm down. And look at the good news.

  • India growth rate is as high as ever, at over 8% of GDP.
  • 3rd quarter corporate results show a steady growth in revenues, and a flat to positive profitability.
  • The US indices are up right now after a long time of poor performance. FIIs are happy to book some gains in India and invest in their own economy. Some short term money will definitely move away. Some of this money in fact is moving from Indian equity to Indian debt – to take advantage of higher returns.
  • Periodic scam news in India is only to be expected. Problems will be unearthed. SEBI and authorities will take action. Soon the issues should be ironed out. Whether it is Real estate loans or Telecom.
  • Definitely the government will not stand in the way of a going, successful business like telecom. But there needs to be a stable policy environment here. And interests of all – government, business and consumers need to be balanced out. A sector that today is 6-8% of the Indian economy in terms of direct & indirect revenues, definitely is important enough to be  well regulated.
  • New sectors like MFI are grey areas where governments have been taken by surprise. Soon monitoring and governance frameworks will emerge, and the panic will be over.
  • Agriculture is seeing higher demand (and prices) and will respond in one or two seasons with higher outputs.
  • Very soon, somewhere the Indian Indices and market will find support and strength will emerge again.
  • A lot of domestic institutions and Indian investors are only waiting to re-enter the market at lower levels

Relook at the big picture

  • As an investor, you need to have faith in the Indian economy and confidence that these are boom years where India goes from a poor/ emerging to a mid income/ developing economy. This is a 15 year story not a 1-2 year flash in the plan
  • Given this, any dip in the market is an opportunity to accumulate. The market will surely rise. For you, it is an opportunity to buy cheaper.
  • Your current portfolio may appear to be losing value, but if you can wait for 6-12 months, the situation will inevitably reverse.
  • Relook at your portfolio, identify the strongest stocks/ MFs that you have most confidence in, and invest in them at these lower levels.
  • Invest systematically, with a plan to buy on a monthly basis, spending a comfortable sum of money

Disclaimer:

These reports and documents have been prepared by JainMatrix Investments Ltd. They are not to be copied, reused or made available to others without prior permission of JainMatrix Investments. Any questions should be directed to the director of JainMatrix Investments at psjcar@hotmail.com Also see: https://jainmatrix.wordpress.com/disclaimer/

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