The Indian stock markets journey in 2018 was not an easy one. It continued to meet certain headwinds either on the global or on the local front.

The Nifty rose from 8284.50 to 10,836 from January 2015 to the time you’re reading this email. This
indicates a jump of 30% since 2015. Even though Nifty is up since the start of January 2018, small-
cap and mid-cap stocks dripped by 24% and 15% respectively as on date.

Many asset classes including gold encountered volatility in 2018. Real estate delivered flat returns and 2018 was an overall year of consolidation for the Indian stock market.

With 2018 behind, the question is: Is the New Year a year to invest, wait and watch or sell? Our 2019 market outlook will help you with an investing blueprint for 2019.

R&R 2019 Market Outlook

Before we start, we wish to highlight that global and local developments will continue driving the Indian stock market in the coming months.

The key global development is to watch out the rupee-dollar equation. The rupee depreciated by more than 9% in 2018 and has been impacted by various factors such as crude oil prices, US-China trade fear, US yields and hike in US interest rates.

On the local end, the much impending election will weigh heavy on the Indian stock market.

Apart from global factors, we believe that elections will continue to sway the Indian stock market in the short to medium-term. But this volatility will erode once the bigger picture i.e. GDP growth, reduced inflation, etc. takes the front seat. As per our observation, volatility is at the peak 2-3 months before the election and minimizes as the dust settles. In fact, between any two elections, Nifty jumped 80-95% irrespective of the change in political power.

As shown in the table above, the economic indicators seem to be improving. With this, the tailwinds supporting the Indian markets in the end of 2018 and the coming year is rupee appreciation and a decrease in crude oil prices. The rupee has appreciated by more than 5% since Oct 2018 and even oil prices dropped by more than 40% from its recent high. This will have a significant positive impact on CAD. With India primarily being a consumption driven economy, we believe we are better placed to absorb global shocks as compared to other emerging economies.

What An Indian Investor Should Do?

Keeping all the points in mind, long-term investors need not worry as long-term risk-adjusted returns tend to be better.

One should stick to a systematic approach while investing in the stock market. Any decline from the current levels should be used as an opportunity to invest in quality businesses while having a longer-term perspective in mind.