India will be among the top three countries in the world, both in terms of GDP and market size, and the more FIIs turn into sellers, the bigger the spring return will be, experts believe.
There are three factors driving stock markets: valuations, earnings growth and liquidity. While valuations are currently attractive and earnings expectations are also broadly positive, drying up liquidity has been one of the main highlights of summer 2022.
This has given rise to a value-conscious mindset among investors, said Kamal Manocha, Founder and CEO of PMS AIF World, as he began a roundtable with key equity market thought leaders. during its mid-year event, titled Summer of ’22: Equity is in the Air.
After almost two years of liquidity-driven market recovery, we again face macro risks to the market.
But, as always, market experts believe the opportunities for wealth creation are always in the hands of patient, long-term investors.
“India as an economy and a society is set not just for a head start but for a huge leap forward, which is not short term but long term,” Bharat Shah said. , Executive Director of the ASK Group. “It is not minor, it is substantial. And the exchange is not superficial, it is profound. Therefore, the opportunity for wealth creation is not something of a variety of briefing, she is huge.
Shah sounded upbeat about India’s story during this panel discussion held at the recent PMS AIF World Third Mid-Year Global Summit. PMS AIF World is a new investment services platform focused on the alternatives space for HNIs looking to make good analytics and knowledge driven investments.
Human emotions and investment decisions are so closely related, yet so different. Market movements are entirely dependent on investor sentiment, which is governed by the experiences of the immediate past. Investing, on the other hand, is about turning away from immediate market reactions and focusing on finding long-term opportunities.
“I believe there have been profound changes in the character of this country over the past 5 to 8 years. Some of the changes combine to create a crescendo, while some are in sight and some changes will take longer to have an impact,” Shah said.
He thinks that one of the markets that offers long-term credibility is India and that from a long-term perspective there is hardly any choice available in terms of size, substance, quality, character and scale like India.
However, Raamdeo Agrawal, co-founder and chairman of Motilal Oswal Group, said it was important not to repeat mistakes, but rather to learn from them and refrain from falling into the same trap with a myopic vision. In the current scenario of drying up liquidity and rising interest rates, the extreme valuations commanded by some of the growth companies have seen a deep correction and it is highly likely that there will be more correction.
“Investors didn’t know the true value of these digital companies, but they continued to get momentum-based global valuations,” Agrawal said. Earnings growth at most of these companies has been minimal, leading to repricing of their PE multiples.
Markets have become jittery and more cautious, with foreign institutional investors (FIIs) shying away from Indian stocks for almost 10 months now. Agrawal believes investors will need to make further adjustments to their strategy and their holding period could increase further.
There is always a flip side to anything unfavorable. And that’s what Prashant Khemka, founder and managing director of Whiteoak Capital Management, is looking for. “It’s always positive,” he said. FII-backed sales have made Indian markets realize their strengths, not regret their weaknesses.
“If foreigners have sold so much, then they have relatively less to sell, and even after so much selling, Indian markets have fallen by less than half of what US markets have lost,” Khemka said. He said it’s time to revisit the past when it was believed that the global market would behave based on what would happen in US markets.
Khemka expects that over the next decade, India will be among the top three countries in the world, both in terms of GDP and market size, and the more FIIs turn into sellers, the more the spring return action will be greater and greater will be the opportunity for the country.
“When there is an opportunity, don’t look for gifts or doubts, concerns, skepticism and worries are a natural, defensive and protective mechanism, but when you apply this unduly simply because prices are volatile, then I think you’re not investing, you’re just dancing to the beat of the markets,” Shah said.
Experts see the opportunity now and believe it will be there tomorrow and beyond. But it is important to recognize this opportunity and stay engaged.
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