Monday, February 04, 2013

“It might be a jagged recovery with false starts along the way...”

Is the current stock market rally in India for real or is it just another bubble before a plunge?

B&E: Is the current stock market rally in India really a building block for the next bull run or is the momentum just short lived?
MM: Yes, the rally is the beginning of the next bull run. The market is forming a bottoming structure which will be very volatile, so we can expect substantial downturns along the way. The fundamental fact, however, is that currently a base is being built for a long-term bull market. One thing to remember is that with the high volatility we experience these days, bull markets can go and come in a relatively short period of time, so you can have a number of short bull and bear markets before a large base is built for a longer term steady bull market.

B&E: What about other markets, particularly emerging markets? Are they also on the same track?
MM: All emerging markets are up substantially from their low points.

B&E: What impact do you think the current political developments in India will play on the stock markets in the medium to long term?
MM: The political developments have been very positive for the market since businesses, both foreign and local, see the opportunity to build infrastructure, extend schooling, housing and health care, and provide the predictable rule of law, which businesses need to thrive.

B&E: There are many economists who believe that the shape of economic recovery is going to be W. What’s your take on the same?
MM: It will be more like a number of W’s... a jagged recovery with false starts along the way might be possible.

B&E: Is it the right time to invest in stock markets or should a retail investor still wait for some time before taking the final plunge into the stock market?
MM: The best time to invest is when you have money. No one knows exactly when there will be a bull or bear market beginning or ending. We do know, however, that bull markets last longer than bear markets and bull markets go up more than bear markets go down. You are thus better off being in the market than out. However, that does not mean that you should blindly buy when there is a lot of bullish excitement. Cost averaging into the market is important with an extended one or two year time frame putting in the same amount month after month.


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).

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