Markets have been going through a rough patch and it’s natural to get scared and sit out. However, it’s the only time when you get excellent businesses at cheap valuations.
Which sectors/ themes do we like?
We specifically like a leading jewellery co, air-cooler maker and a pressure-cooker manufacturer. We find them to be some-what market agnostic and should slowly be bought from a 2 to 5 year perspective.
The underlying belief is that the much talked about Indian Consumption Theme is here to stay for long. Rising incomes, burgeoning middle class, highest proportion of young population and brand awareness – these are long term trends and a global recession cannot destroy them.
All these are debt-free, high free cashflow companies with strong brands. They offer a great upside and a limited downside. A good strategy would be to buy in 2 or 3 tranches so that you can benefit from the current downtrend in the market. Although the macro-environment within India (depreciating currency, high interest rates, inflation, high fiscal deficit and policy paralysis) and across the world (European default, FIIs exiting India) point to further pain in the Indian markets, it is prudent to buy small quantities at every market fall. One should remember that it’s always difficult to catch market bottom and market reversals can be sharp enough to leave you dry.
P.S: Equity as an asset class in extremely rewarding in the long term, however only individuals who can bear interim volatility should invest in stocks. Kindly consult your investment advisor before acting on advice provided here.