Nikhil Kothari of Etica Wealth Management summarizes the key takeaways from Raamdeo Agrawal’s speech at the Cafemutual IFA Event 2016.
Current challenges:
Global deflation: World is in a negative interest territory whereas India offers 8% risk free return
The biggest reform for the market is cleaning of banking system
Corporate profitability is a cause of concern. Ultimately, companies have to deliver profit for share prices to go up.
Markets are currently volatile due to global headwinds as 40% of the free-float of Indian markets is owned by FIIs. So, global markets have an impact on our market.
Recommendation to investors
To make money in stock markets, one needs to have vision, courage to buy stocks and patience to hold them. But most people don’t have the patience.
Markets are irrational in the in the short term. However, over a period of time, markets become more rational. So investors should focus on what is important and knowable. Avoid market noise.
Rationalize the irrationality. We should not try to read too much into short term market fluctuations.
Diversification is very important in a portfolio. Even if a single stock falls by 50% and other stocks perform well the overall portfolio will be very strong and give handsome returns.
Focus on quality companies with high growth. Only high quality and high growth companies can create wealth. Growth, quality and valuations are equally important.
The Indian economy will see a healthy growth in next five to six years and as a result the discretionary spending will increase tremendously.
It is a good time to buy equities as the valuations are very attractive. It's a great time to invest lump sum money in equities and stay invested for next 10 years.
