Market rally to be more back-ended with second half witnessing strong performance, invest in quality stocks

Elections, policy rates, margin pressure and global issues are some of the factors that will continue to weigh on the markets.

Invest in quality stocks, "Good & Clean” companies

By Manish Jain

The ongoing Russia-Ukraine conflict has certainly spooked the global markets. The S&P500 has corrected ~8% YTD CY2022 on the back of fears of a full-blown armed conflict between the two countries. The Indian markets have too not remained oblivious to it, correcting ~7% from the peak of mid-January. Not just the stock markets, the Russia-Ukraine conflict has had an impact on the global commodity prices too with crude oil hardening ~23% YTDCY2022 to $96.

The geopolitical tensions are on the rise too, US/Nato forces and Russia being divided into opposite lines. This will be a threat to world peace and a potential return to the cold war days but also remember that Russia is an important part of the OPEC+. The standoff could mean the global oil prices can potentially harden even more from here. This means our BoP can go for a toss, global inflation can spiral, even more, the interest rate cycle can harden even more and GDP growth can come under pressure.

The key question is – What should an average investor do?

First is to reconcile to the fact that markets, global in general and Indian in particular will remain iffy and volatile. Elections, policy rates, margin pressure and global issues are some of the factors that will continue to weigh on the markets. While we remain constructive on the Indian markets, we believe the rally will be more back-ended with the second half witnessing a strong performance as most of the issues settle down.

The second thing that an average investor needs to understand is that events like these happen every few years and it invariably always seems like there is no light at the end of the tunnel and that’s when panic sets in. The point is that bigger events have happened, yet we have managed to survive and thrive. GDP has grown, earnings have grown and equity markets have rallied and returns have been made. The whole point is that the dust always eventually settles down and the light makes itself visible and the tunnel comes to an end.

The idea is to be patient, have a long term vision in mind and break the cycle of greed and fear. Take this for example, if you as an investor would have invested in the Nifty in Nov 2008, amidst the global financial crisis, the compounded returns would have been close to 15% CAGR. The idea is to keep calm, always invest in quality stocks, always do your homework properly, always invest in “Good & Clean” companies, and not panic. Over the long term, your wealth will compound, and your money will multiply.

So, keep calm and keep investing!

(Manish Jain, Fund Manager, Ambit Asset Management. Views expressed are the author’s own)

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