Disclaimer: Please do not consider this post as an investment advice. I am not a registered financial advisor. Please consult a registered financial advisor before making any investments.
Credits: Most of the content of this post is public information that has been referred from the business news websites and publications.
It’s been quite a while since my last post, so let me begin by apologizing for the same. Having said that, I’ll try to be more consistent with the posts and bring more valuable content to all of you. With that lets get back to business.
As I write this post, stock markets around the world, especially the US and Indian markets seem to have been spooked by a ghost.
The BSE Sensex is down some 4300 points (61.5K to 57.2K) and the Nifty 50 is down 1200 points (18.3K to 17.1K). That is a drop of almost 7% on Sensex and 6.5% on Nifty.
But the question is: Is it really a drop big enough to label the markets in a bear category.
The short answer is: No, not at all.
If we zoom out check, we were at the same market levels sometime around Dec 24, 2021 last year. So it seems we have gone back by just a month!
But, if we zoom out even more, we can clearly see the same market levels in Aug/Sep 2021 last year. So, in reality we are back by 5 odd months!
While a drawback of 6-7% is a good start to bring back some sanity in the market, it is by no means a fall significant enough to be called a great opportunity to enter the market or deploy fresh funds. We need a drop of at least 10-15% to get some mouth watering opportunities.
Whenever we see such a drop, we have some questions on our minds:
At what levels will the market present some great opportunities?
In my humble opinion, we would be able to see a lot of opportunities if we see another drop of 6-7% from here. That translates into Sensex around 53K and Nifty 50 around 15.5K
I can’t wait, are there any opportunities in the market right now?
Well yes there are a few, but we have to be extremely selective and cautious while deploying fresh funds at this time. Most of the good businesses are still fully priced and some are still obscenely priced, so a good strategy would be to wait out for now.
Where do I see pockets of opportunities right now?
I can see some decently priced businesses in the following sectors
IT
Natural gas
Tobacco
Banks/NBFC
Automobiles
Agriculture
Did I invest during this drawback?
Yes, I did.
I topped up my position in a well entrenched but currently ignored NBFC with great fundamentals.
I also took a small position in a slow growing IT services company with mouth watering dividend yield and great cash flows.
PS: If you are interested in reading about some businesses that I have analyzed in the past head over to - https://indiandhandho.substack.com/
I invest via index/mutual funds, should I pause or redeem my SIPs?
The one and only answer to this question is NO. Since you are participating in the markets via index or mutual funds, please do not stop your SIP at any cost. Since you are unable to track the markets on your own, you must continue your SIPs to take advantage of rupee cost averaging and let the compounding work its magic over long periods.
Summary
We have seen a good amount of drawback since the last 10 days, but this is mostly an illusion as we were at similar market levels in Sep 2021. The bull run that started in April 2020 has been quite stupendous and relentless. This was a much needed breather to cool down the market and the bulls.
Having said that, I am still praying for a further downfall from here as that is the point when we would see a whole lot of good businesses available at attractive valuations.
I hope this article helped you in making some sense of the recent fall in the stock market.
If you liked the article, please do share it with your friends, family and other connections.
I would be publishing more such articles where we would talk about some general topics around the market and also analyze an industry or a particular Indian “dhandho” (business) so that we all become better informed investors. So, please consider sharing this space.
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Until next time. Take care.
Best regards,
Sahil