INVESTMENT: POST BUDGET Kya Karen, kya naa Karen....
Budget euphoria is over now and the Markets are at their Sep, 2018 levels, with no sign of confidence & direction. Investors have lost over Rs 6.59 lakh crore since the Budget as foreign investors are on selling spree following the adverse announcement. The average market capitalisation of BSE-listed companies dived from Rs 151.35 lakh crore recorded on July 5 to Rs 144.76 lakh crore as on July 22, which translates into a fall of Rs 6.59 lakh crore.
Corporate results for 1st quarter are pouring in and market is getting sense that it had run ahead of fundamentals hence retraction. RBI is trying hard to douse the NBFC crisis, but it is simply refusing to die down. Federal Reserve interest rate cut & a rise in crude oil prices are also weighing the Sensex down & testing the nerves of Indian investors..
So, what to do now ?
Equity as an asset class is the youngest among all the available opportunity in the Indian Financial System. Debt or Fixed Income Security, Real estate, Gold all have been long explored and practised as the major source of wealth creation since generations, and therefore our understanding of same are certainly much better than Equity. But despite the superlative performance given by Equity, it has always been misunderstood; therefore it is necessary that we learn the tenets of Equity investment.
Equity is rightly explained in terms of Ownership in any entrepreneurship. An Owner shoulders the burden of risk and hence deserves to corner the reward as well. Therefore the Risk and Reward are the attached attribute of equity. The Valuation of Equity is ordinarily explained in terms of Index movement popular are Sensex (BSE – 30) and Nifty (NSE-50). Ironically Stock prices does not move in linear straight line, rather they oscillate as its function of earning identified as EPS, Return on Equity, Book Value, Dividend Yield, thus giving you bouts of nighmare..
Good performance rewards its owner; poor performance mess up your capital even. So while we invest in Equity both directly & through Mutual Funds, we must look at the fundamentals of underlying and compare them among the peers before investing.
Ironically we buy when Index is High, when PE multiple is high and sell when Index is Low, PE multiple is Low. The result is always worrying past, a regrets and frustration. Why do we do this? We are prisoner of our biases and follow the dictation of Greed and Fear.
Discipline is said to be only remedy rather Panacea. Experts suggest follow market closely but Invest regularly through SIP- Systematic Investment Plan. BSE coined Sensex in 1979 at base of 100 has now scaled up to 38000 while lurching between steep volatility and boring plateau, but giving fantastic returns of 17.50% p.a. return.
Wealth formation through Equity is the only asset class where you can create wealth in real terms. You just need BELIEF & DISCIPLINE.
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About the expert: Manoj Garg : MBA, CPFA, IRDA Certified (LI+GI), Ex-Xaverian has a rich experience of more than 22 years in the Banking & Finance Industry. He has worked long years as Zonal Head (East) – Investment Division in ICICI Bank & IDBI Bank and as a Regional Vice President (East) of Tata Mutual Fund. He owns Simply Invest – A Mutual Funds advisory company.
Disclaimer : The information contained in this section of the Website is for general information purposes and is the opinion of the writers. It has been prepared with the help of sources already available to the public and believed to be reliable. While all reasonable care has been taken that the facts stated are accurate, we shall in any way not be responsible to anybody for actions taken based on the contents and for any inaccuracies in the information provided. It is neither an offer to sell nor solicitation to buy any of the stocks or Mutual Funds mentioned herein. This information is not intended to provide specific personalized advice including, without limitation, investment, financial, legal, accounting or tax advice. The name of the scheme should in no way be considered as a guarantee or assurance of returns in the scheme. Mutual Fund Investments are subject to market risks & past performance of any Mutual Fund scheme is not an indicative of the future performance. Read all scheme related documents before investing.
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