Rumors emotions and beyond

The past 15 odd days have been amazing for India – there have been some big good things and some bad as well.

We saw the incumbent government coming back – with an even bigger mandate and it means a stable government at the center for the next five years.

But there have been some rumours & news flows that have affected all of us.

If you remember markets a few months back, volatility and uncertainty looked ubiquitous.

The role of a few unfriendly events that have unfolded over the past few months cannot be undermined due to which the growth of Indian markets over a short-term remains subdued.

What Went Wrong?

It all started with the dawn of NBFC crisis starting with the crackdown in IL&FS followed by DHFL. This is not all. Due to the liquidity crunch, NBFC’s were facing a shortage of funds to repay the loans taken by them to their creditors like banks, mutual funds, insurance companies, public sector banks and insurance companies. This affected their ability to give loans to consumers which in turn has slowed down the consumption sector.

Due to the decline in consumption sector, auto companies witnessed pile-up in their inventories as easy access to credit offered by NBFC’s dried up considerably, leading to disappointment for those looking to buy vehicles on credit. Market leaders like Maruti Suzuki, Tata Motors, and M&M have already cut down on production and is considering further cuts in the coming weeks. All this ultimately led to feeble earnings data and GDP growth rate, thus making investors wary while entering the stock markets.

Unfortunately, due to these headwinds in an Indian economy, we often face these questions from the investors:

Why should I invest now?

Should I wait or watch?

What if markets undergo significant correction?

However, this is the tale of the past.

Looking At The Present

One can understand that till a few days back, government was busy with elections that prevented them from taking some concrete action. With the budget 2019 round the corner, we definitely expect a major announcement that can boost the economy over a longer run.

One cannot ignore the positives in an economy i.e. stable government at the center, recovery of the NBFC’s, last leg of major production cut in auto companies, recommencement in decision-making and budget in the offing that shall propel India’s growth story in the long haul.

R&R Market Outlook

Yes, due to the slowdown in economic activity, GDP growth rate and earnings data, we may experience a short-term dip owing to the overhang of the past negative events.

With the reforms in sight, this seems to be the last quarter getting impacted with the above headwinds and could probably be the lowest point we see for consumption patterns, corporate earnings & GDP growth for the near future.

As a long term value investor, you can safely ignore these transient short term negatives and use it as an opportunity to invest for wealth creation.

With the government taking positive actions to boost liquidity and in turn boost consumption, revival of corporate earnings and GDP growth rate may seem not far beyond August 2019.

With the budget in the offing, a positive announcement to revive the NBFC saga shall only trigger markets to the next bull-run.

As it is wisely said by Albert Einstein “In the middle of every difficulty lies an opportunity.”

Our question to you is – Are you ready to capitalize on this golden opportunity?