Dalal Street Investment Journal — July 10-23, 2017

(Brent) #1


It’s A Stock Picker’s Market - Right

Time To Adopt Bottom-Up Approach


inally, we have got a minor correction in benchmark indices, and I am saying ‘finally’ because
markets have been refusing to correct, despite geopolitical concerns and earnings growth not
matching the valuations. I think the best part of the current market, which is unnerving a lot of
experienced investors and traders, is the lack of volatility at the peak. Long term investors might
take respite from the fact that low volatility stems from a solid macroeconomic backdrop, reflecting strong
economic growth.

Indeed, macroeconomic outlook for India has never
been better. Even on the global front, most of the
advanced economies are showing signs of stability.
Dow Jones started the second half of this year on a
strong footing and touched record highs, thus
making a strong statement for those who fear
market fall.

In June, a stable currency and high interest rate
differential between India and the US has kept the
FIIs interested in the debt instruments in India. This
trend may continue in July as well.

While the current liquidity-driven rally may
moderate owing to concerns on heightened
valuations, profit booking, uncertainty around GST
and the NPA issue leading to corporate insolvencies,
the bullish scenario for equities remains intact. The
markets will attempt to assess the impact of
disruption caused by the GST and will take cues from corporate earnings in the April-June quarter.

In this issue, we have candidly placed NBFC segment as one of the hot spots in the financial sector as we
believe the mojo lies with a select group of NBFCs. Am sure you will enjoy the cover story with

Another interesting aspect of the equity markets is the buzzing IPO market in 2017. I am excited with the
prospects of IPO investing as so many quality companies are hitting the markets with a lot of value on the
table for the investors, including retail investors. Hope you will relish reading some of the interesting
aspects of IPO investing.

Coming back to markets, investors should stay cautious as always and adopt the bottom-up approach to
investing as now it is a stock picker’s market. As the number of stocks touching their record highs increased
in June when compared to May despite poor performance of the benchmark indices, it is critical that
investors focus on individual stocks.

One of the mistakes to avoid in a bullish market environment is to invest in penny stocks—one needs to
control this temptation. Rest be assured of the strong fundamentals and positive outlook on economic
growth, which are the key drivers of equity outperformance in the longer run. Buy on dips should be the
strategy for those with a long-term view.

Happy Investing!

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