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    Samvat 2075: What To Expect ?

    Publish Date: November 2, 2018

    Before Samvat 2075, Samvat 2074 began on a bear note. And since then, it’s been a rollercoaster ride. From fresh lifetime highs to a correction, Samvat 2074 has been everything that a stock market is known to be—volatile, breath-taking, unpredictable. There were bulls. There were bears. And there were those quietly searching for greener grass from the side lines.

    As the Earth turns a full cycle around the Sun, many investors and traders are already looking forward to Samvat 2075. Will the new Samvat year—beginning on Diwali day, November 7th—see a continuation of the factors that currently affect the markets?

    There is enough on the plate already. While a depreciating rupee and impending general elections cloud the domestic horizon; rising interest rates, crude oil price volatility and escalating trade war between two of the world’s largest economies—United States and China—keep the pot boiling on the global front.

    Related read: Large-caps or mid-caps? Stock-picking in times of trouble

    SILVER LININGS

    While it may seem all dark and gloomy, it’s important to look for the silver linings lurking behind dark clouds. After all, it has been proven time and again that bull markets love to climb a wall of worries. Here are some positive trends:

    1. Nifty still an underperformer: The Nifty 50 is still an underperformer, even at its present 10,000 levels. The bourse, which climbed from a low of 6,825 in 2016, is still trading below the rising trend line. There is enough indication that there might be a shift in the medium term trend of the market. A peak of 11,000 or 11,200 for Nifty looks very likely in the short to medium term.

    2. Earnings momentum: The second quarter earnings have given a much-needed momentum to the markets. The earnings have been better for the September quarter compared to the last few years. As per a Bloomberg Quint report ,only 6 of 27 Nifty companies that have reported their results (as of October 29th) have underperformed consensus. Majority have performed as per expectations, with 5 outperforming

    3. Reasonable valuations: Thanks to the corrections in the stock markets, valuations have come down from the peak levels. Equities are much more attractive now than they were a few months back. This suggests that the fall in the stock market was a correction, and not irrational panic selling. A correction usually is rational and linked to company’s actual financial performance.

    4. Stabilising currency: The Indian Rupee has given up on volatility to a great extent. It is now seen stabilising, much closer to its intrinsic value of around 73 against the US dollar. A volatile rupee was one of the key drivers of a bear-run in the markets.

    5. Strong local flows through SIPs: Local investment into mutual funds, especially through systematic investment plans (SIPs), is broad based and spread across various market-cap orientations. The SIP culture is expected to continue which can provide cushion to markets in any major fall.

    Related read: Factors that can control Nifty’s free fall

    However, going into Samvat 2075, it is also important to keep in mind any potential risks. That is what separates the realist from the romantic optimist.

    The first half till the parliamentary elections could be challenging and filled with risk-aversion. The second half could be a function of election outcome and markets reverting back to earnings growth and valuations. You may also want to monitor and factor in world events and global outlook on an ongoing basis, while making the investment case for Indian equities.

    THE BOTTOM LINE

    Paying minute attention to individual stocks could help investors, especially in Samvat 2075 as the risk-reward ratio has turned attractive for large parts of the Indian market. Of course, it is never easy to decide on which stock to buy. Whatever your strategy may be, one thing is important—don’t let fear keep you away from the stock markets . Let this Diwali be the time you emerged victorious and financially secure.

    Best Wishes and Happy Investing!

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