BE DRIVEN BY VALUE

What is going on in the market now?

Most people are wondrously looking on. The anxiety to invest remains high. The index seems infallible despite company-level bad news periodically hitting the street. The interest has shifted​ towards larger companies. Midcaps seem to be taking a momentary pause. Global ETFs seem to like the Indian markets a lot. Investors, both domestic and foreign, are clearly eager to participate in larger economy plays that they believe will deliver over the long term.

The bigger QIPs are going through smoothly. Institutional Investor appetite for placements is at an all-time high. The SBI QIP is clearly evidencing that trend.This is making the Index movers even more expensive. As the markets become expensive, the government is trying to push the RBI for a rate cut. That is not working either as the RBI’s monetary policy committee, a brainchild of the current government, simply refuses to oblige.

So, the wait for growth to return seems to be getting excruciating as GST gets ready to roll out. Will GST deliver the economy its much needed magic potion?  The economy should most certainly see a shift in a number of businesses from the informal, un-organised space to the formal organised space. We don’t know how soon the headline numbers will perk up. But, clearly, the cause for gloom advocated by the GDP critics seem to be a bit stretched and imaginative.

A more pragmatic approach would be to invest in parts of the market where valuations are modest, risks are controllable, and drop in uncertainty can significantly alter public sentiment. Typically, these will only be in the domain of value investing. Finding such opportunities should be every investor’s priority.

 

“Markets can remain irrational longer than you can remain solvent.”- John Maynard Keynes

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