There is an old adage in the markets that “the bull market climbs a wall of worry” in this context, keep in mind that bull market corrections are brutal and treacherous.
Since the markets bottomed in March 2020 Nifty at 7500 we have seen a one way move in the markets with the Nifty50 rallying to 18600 and there has been regular talk of the overvalued market and profit booking .
We spoke to Aditya Sood, Fund Manager – InCred PMS, about what investors should do after a sharp correction seen in the market:
This is the first significant correction we have seen since the onset of COVID and despite the headline indices correcting by 10-15%, many stocks have corrected by 20-50% due to the divergence in sector trends.
Wealth creation opportunities lie in sectors and companies that have underperformed markets and their peers, either due to transient externalities (NPA/chip shortages/covid recovery), execution delays or pure lack of investor interest, despite offering good prospects for earnings growth.
Looking only to leading indices to decide whether to take profits off the table is not a prudent investment style. Some sectors underperformed stock indexes in 2021, including consumer staples, pharmaceuticals, automotive and financials.
Volatility may persist, but it also offers plenty of opportunities to realign the portfolio and be ready for the future.
The Indian stock market continues to benefit from central bank monetary policy and the strong domestic cyclical recovery.
We think equities are in the middle of the cycle, with market multiples not cheap and rebounding earnings growth supporting valuations.
Several factors may favor continued strong earnings growth for Indian equities, namely the start of the up cycle in capital spending led by higher spending on infrastructure projects, PLI incentives for manufacturing, balance sheets debt-free and a low ten-year cost of capital; strong recovery in consumption rising disposable incomes in the services sector and real estate demand fueled by pent-up demand and growing credit supply.
At this point, there is no shortage of ideas for making money and for using market volatility to look for opportunities in the market on an upside basis, which is more relevant than focusing on correction. ‘index.
(Disclaimer: Opinions/suggestions/advice expressed here in this article are investment experts only. Zee Business suggests its readers consult their investment advisors before making any financial decisions.)