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Wednesday, 22 May 2013

If you follow certain principles in stock market, then the worst situation in market is the best situation to invest- Written on 6th June 2012

It seems to be the beginning of a new bull market. Economy turns around after six months of turning around of stock market. Market reacts to any situation before the economy.

1990 was the worst year in Indian recent economy history. In 1990 we were 270 billion USD economy. But although our economy has grown four times since then, the phase of 2012 is compared to that of 1990. Today the Indian economy is more than 1 trillion USD. Savings rate in India is dropping YOY on higher GDP YOY.

Factors like inflation, interest rate, IIP, GDP, politics, investment sentiments are all against the economy, most of them being on the mercy of political will. Many stocks are at historically cheaper valuation. But, one cannot go wrong in consumer stocks. Since 1990 we have crossed three stages. India is at the third stage of savings pattern.  From a high saving rate with low income to high savings rate to higher income to currently (falling) low savings rate to higher income. Our savings rate has fallen from 36% in 2009 to below 30 % in 2011 that too on rising income.  It is a big change which will result in a phenomenal boom in consumerism.
With the downfall of the Indian economy, consumer stocks or consumerism is the sector which will not be affected and it is advisable to invest in such stocks.

If one wants to invest in the stock market then he should be prepared for the worst to happen. If we look at the current scenario of the Indian economy then one should invest with the assumption that Greece, Spain and few more countries could collapse, the value of Rupee against dollar could depreciate even more, GDP rate might grow at 5 to 6%, fiscal deficit can be assumed to be 6%, crude could cost 100 Rs. and the Government could fall. 

Any and every investment in stocks always has a content of speculation. One key factor that should be understood by investors is that one should invest a part of one’s savings not a part of one’s earnings in stock market.  

PS: Written on 6th June 2012


7 comments:

  1. "one should invest a part of one’s savings not a part of one’s earnings in stock market." Very enlightening thought indeed!

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    Replies

    1. Thank you! Keep reading and giving your comments and suggestions!

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  2. Hi Vijay,

    Any new ideas? Can you mail me your email id at raghunathreddy80@gmail.com

    Regards,
    Raghunath

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  3. Hy Sirji,
    Today I read your Ideas on Rakeshjunjunwala.in and I read your this Blog .....
    SIr ,I am a Small Investor and I make huge loss in this market with my fathers money..but she dont know about this....Now I understand the meaning of Investment...But I cant pick a good Mid or Small cap Stock which become multibegurer in future..I am just investing 10000 to 15000 only...pls suggest me 3 to 4 stock....

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  4. I'd invested Rs. 2.5 lacs in LUPIN in tranches from May 2014 to Nov 2015.Absolute return on my investment is approx 35%.It would be nice if you suggest me whether to hold this stock or to invest in some intapped Small cap/Midcap.My mail id is vidaya.srajendra@gmail.com

    From Pune

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