Market at all time highs - What next?

This is that time in Indian markets when investors are slowly but surely beginning to come back towards equity and as always, it’s the time when markets have hit all time highs. Now one dichotomy among the investors is whether it is prudent to invest at this high point or to wait for correction. Here we will try to answer some of these questions.

While there is a sense among retail investors that this is not the time to initiate long positions in markets, we feel otherwise. One must not forget that markets have even though we are at a new high; our EPS has almost doubled from 2008 levels. Also, policy paralysis which was plaguing the market seems to be a thing of the past now. Last 2 year has seen definite policy action from current Government and the expectation of a new strong Government will provide further impetus to the markets. Also inflation appears to have bottomed out and there has been considerable reduction in India’s Current Account Deficit in past 1 year owing to strong measures taken by Government and RBI which has resulted in sharp appreciation of INR from the lows it hit in 2013.

Globally too, recovery is evident across the globe and markets look poised for more. Although, QE tapering is a worry in short to medium term, we feel that it further reinforce the fact that US economy is back on revival path and will benefit a number of export oriented sectors such as IT and Pharma.

Although, volatile environment tends to keep investors away from this instrument, we feel that if one has a longer horizon, equity still remains the best investment instrument considering its ability to generate returns far superior than any other. However, due care must be taken while investing in equity and for retail investors Mutual Fund remains the best mode of investing in equity. At the same time, HNIs must consider investing in equity through PMS route which will enable personalized monitoring of their investments.

Hence, we request you to reconsider allocating a part of your portfolio in equity and reap the benefit of higher returns over medium to long term. While there may be some volatility in the lead up to elections, we still feel that markets will climb wall of worries and reach higher levels in medium to long term.

By Rajat Gupta– Research Analyst (Value Addition) – Concept Securities Private Limited