Diwali came and went. But, the Nifty simply refused to form a new high. As the worst of the quarterly results start flowing, it is more likely that the markets will struggle to hold onto the present levels. With money moving out of defensives sectors like FMCG into cyclical, the markets will gradually shift its bets to the return of growth. But, the return of growth is likely to be slow and protracted. With inflation remaining high, it is unlikely that the usual growth drivers can be put in play. The RBI will need to wait for a while before it can intervene with growth friendly measures. Achieving stability in the exchange rate and significant fall in inflation will clearly take time. In the interim, the stock markets will see range bound trade. And, the trading range is gradually moving higher.
Have patience. A stock you bought won’t go up immediately.
Market turnarounds have a way of surprising you. First, it will appear that everything is wrong with the world of money. The economy will look hopeless. Your currency will look weak. Inflation will be uncontrollable. Interest rates will be close to their highs. Crude prices will be peaking. Headlines will be bleak. No news will be good news. The markets will look like crashing any moment. Then, suddenly, one of the variables will change dramatically. This leads to a chain of events where the other variables start to look up. Gradually, the fear element will leave each domain which it occupied. Crude, commodities, currency, inflation interest rates and economic data will all sequentially look up. Suddenly, the headlines will change. The stock indices will look up. Money will keep coming into the markets fuelling a sequence of positive events. By the time you realize it, the stock markets would have risen significantly. Sounds familiar, right?
Stick to value driven buying.