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: There are different ways to look at a correction in markets. Of the very basic ones, could be that of being extremely careful and retreating from the market to book profits or cut losses. The other would be to loosen the purse strings and go bargain hunting. And the third could be to wait and watch.
With the market correcting by around 9% from its high in October, confounding thoughts hover around the market place. Is this an 'echo bubble'? A phenomenon that takes place when asset prices rise after a severe downturn as that markets respond with renewed positive sentiment, sometimes desperate, and eventually as structural changes take place, normalcy is restored. And the market would tank again like it did in 2008 after the global asset bubble burst. Or, should you gain like those who did when the market neared 7k levels last year.
All the options mentioned earlier are valid strategies for success, just that one needs to be clear about the investment objective and purpose to make the right choice, reckon experts. So on the one hand this correction could be seen as an opportunity to pick up bargains, there is also a case built for caution if its really an 'echo bubble'.
The opportunity
If you have a long-term view on the markets then this could well the time to buy-in. Analysts at UBS Investment Research reckon that this correction literally equals a buying opportunity. “We believe that the recent Indian equity market correction presents an excellent buying opportunity,” say analysts at UBS in their recent report on the India strategy.
However, it is pertinent to understand the reasoning. And it is based on the fact that UBS analysts expect India to post a GDP growth of 8 -9% for the next 10-20 years. They also look out for the attractiveness of the demographics in India and the rapidly falling dependency ratio.
Lower penetration of products and services coupled with a stable government at the moment, also add to their positive sentiment. So clearly, UBS has taken a long-term view of the current correction and reckon that if India has to grow at the rate that they have estimated this could well be the right time to pick up equities. “We are positive on the Indian market in the medium term with March 2011 BSE Sensex target of...
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