Investing during historical times: Stick to quality stocks
the economic impact was negligible. Real GDP growth was 7.7% year-on-year in 1977-78 and 7.5% in 1978-79. Industrial sector grew ~6% and 11% in these two years.
As per recent data, total amount of currency in circulation was ₹17.5 lakh crore, of which more than 86% (or ₹15 lakh crore) is in the specified bank notes. Further, almost 13.5% (₹2 lakh crore) – the highest since 1989-90 — of household gross financial savings were held in currency in 2015-16. The decision to demonetise specified bank notes will impact some consumption items in the near term; durables, real estate demand, jewellery and other purchases will need to be watched for. On the positive front, the decision is expected to give benefits over the longer period. This is because all fake currency notes of specified bank notes will become worthless and thus, cash economy will be curbed in a significant manner.
The second event of Mr Donald Trump getting elected as the US President, though unexpected, should not create major disruption for Indian markets. While the near-term market direction will depend on the capital flows and how the global markets react to this event, we believe India is well placed from a fundamental view point, underscoring our positive view. Mr. Trump, in his election campaign, has talked about India being a strategic ally and the relationship between the two nations will strengthen further. India looks particularly attractive in the global context given that growth is scarce in world and India offers 7-7.5% GDP growth, highest in the world. Stable macroeconomic parametres, normal monsoon after two consecutive draughts, disbursement of 7th pay commission awards, government’s reform initiatives coupled with an underlying recovery in the earnings growth of companies further bolster India’s case.
So, once the dust settles down on global events, we expect the focus to return to fundamentals. For investors, such volatilities may be unsettling, but surely rewarding times to make longterm investments. Caution, just stick to quality stocks ,even better in mutual funds.