Take Your Pick From Quality Stocks On Offer At Discounts
The recent week gone by was nothing less than dramatic for the investors, as bears took the lead and made investors go through a roller-coaster ride amid some shocking developments. The tussle between the government and the RBI led to the exit of Urjit Patel as the governor of the RBI on Monday. Though Patel cited personal reasons for his resignation, his exit not only hit the Indian equity markets, but also affected the bond and currency markets. Just when the markets took this hit, another negative event battered the market in the form of the defeat of the BJP in the elections in three states where the party was in saddle, namely, Madhya Pradesh, Rajasthan and Chhattisgarh. These results may be taken as an indicator of things to come in the upcoming general elections in 2019, which is sentimentally negative for the markets. However, despite this outcome, the BJP is still in power in 18 out of India’s 29 states.
Meanwhile, when the markets faced double whammy of RBI governor's resignation and the defeat of BJP in state elections, it also got double glee in the form of lower retail inflation and higher factory output. India’s retail inflation decelerated to a 17-month low of 2.33 per cent for the month of November, while the factory output increased by 8.1 per cent in October. This could change the central bank’s monetary policy stance to 'neutral' from the present “calibrated tightening”. Further, the lower inflation might push the monetary policy committee to go for rate cut in the next bimonthly policy review meet. Shaktikanta Das has taken over as the new governor of the RBI after Urjit Patel's resignation.
On the global front, OPEC and other major oil producing countries have agreed to cut production by 1.2 million barrels per day during the two-day OPEC meeting in Vienna. This could lead to a rebound in oil prices in the short run. Another major global event which is likely to cast a shadow over the trade talks between the US and China is the arrest of Huawei CFO Meng Wanzhou.
The BJP has lost some vote share in the rural constituencies, hence we believe ahead of the upcoming general elections, the Union as well as the state governments are likely to boost spending, especially in rural areas, to revive the rural economy because, at the national level, 65 per cent of the constituencies are rural. Consequently, we foresee good opportunity for players in FMCG, media, agricultural inputs and auto sectors. Hence, in the short run, the stocks may run up and you may end up paying too much, but this should not be the only parameter for your investment decision. The governments' spending is likely to dwindle after the elections as the new government will moderate the spendings.
We urge our investors to identify stocks which have sustainable earnings growth trajectory historically and are expected to continue this momentum in the future too. After all, one can reach to one's destination by looking at the windshield and not by looking at the rear mirror. It is hard to find such opportunity at discounted prices, but looking at the current scenario, we may find some opportunity in the near term, not at steep discount, but at a decent level. “Opportunities come infrequently. When it rains gold, put out the bucket, not the thimble,” advises the legendary Warren Buffet.