Take Your Pick From Qual­ity Stocks On Of­fer At Dis­counts

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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.

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