What’s More Interesting? 5-6% Downside Or 500% Upside

22 Feb 2018by Research and Ranking

What’s More Interesting? 5-6% Downside Or 500% Upside

Imagine a scenario where you have two options.

Option A: This option is simple yet at the back of your mind, you know that you are missing out on something BIG.

Option B: This choice is slightly difficult than Option A, but it eventually leads to the path of SUCCESS and this makes all the efforts worthwhile.

Now our question is: Given a choice between the two, which option you would opt for?

The obvious answer for most of you would be Option 2.

If we know the answer, then what’s the reason behind our dilemma when it comes to our investments?

Why do we get distracted in spite of being aware of the fact that good things require efforts to make it happen?

The Sensex has braved a correction of ~6-7% in this month. In the aftermath of this correction, we witnessed frenzied reaction from domestic investors which led to massive sell-offs in the Indian stock market. To be honest, there may be a further correction in the range of 2-5% owing to the macro and micro-economic indicators.

However, we are still not perturbed by these corrections. There are three reasons why one should not be bothered with market corrections:

    1. While the downside of 5-6% was inevitable on account of global forces and the transient impact of LTCG, we have our strong conviction in India’s growth story. This growth would be reflected in the Indian stock market and we forecast markets to comfortably discount FY19 EPS at about its long-term fair multiple of ~20xs implying index levels of ~ 38,000. This would imply an appreciation of approx. 12.4% from the current levels at index level in the near future.
    2. As an equity advisory company, we periodically monitor the recommended portfolio to study if the growth rationale still holds true and whether these companies can stand the test of time. As per our quarterly analysis, the results disclosed by the companies on our radar have displayed strong fundamentals which makes us more optimistic about their potential to deliver the multifold returns in the coming years.
    3. We take market corrections as a blessing in disguise wherein aspirant investors can leverage on the downside and enter the markets at low levels to buy sound businesses.

Now, it’s easy to get diverted from our investing goals and it’s even easier to wait and watch. However, the biggest loss would be a lost opportunity to create wealth.

Coming to Option B which is difficult than option A, but it will definitely lead you towards your financial destination i.e. wealth creation.

Now when we have given you both the ways with their consequences, it depends on you: A way which leaves you with regret for missing the opportunity or a route which gradually turns greener with every passing day. All you have to do is Water it once, and that time is NOW.

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