BackSensex @50K : Can you make money in stock markets at 50,000 level?
Unfortunately, a lot of the savers have missed out on participating in this historic wealth generation due to either lack of awareness or misplaced fears of short term market falls.
PremiumBy Ashwin Patni
Markets have touched 50,000. Like other peaks over the last 40 years, there is jubilation and wonderment amongst the finance community. While it might seem momentous, these levels and dates, in reality mean nothing at all. An Index such as Sensex ultimately is a broad representation of the performance of the market. So when someone says the index has risen 50 times in 40 years, it is a representation of how the Indian equity markets have fared over this time. This growth has come through periods of booms and recessions and across bull and bear markets. So for investors or observers, the greatest lesson is also the simplest lesson – India has long term structural tailwinds that will allow us to keep growing and these trends are far more powerful than shorter term cyclical ups and downs as far as wealth generation is concerned.
Unfortunately, a lot of the savers have missed out on participating in this historic wealth generation due to either lack of awareness or misplaced fears of short term market falls. Even today, less than 1% of our population has exposure to equity Mutual Funds, the simplest and the most powerful vehicle available to participate in this opportunity.
So this landmark can serve a very important purpose if it provides an opportunity to all of us to introspect and look at our behaviour as long term investors and see if we have made the best use of this opportunity. Secondly, we should also realize that ultimately market highs do get overtaken over time and so will this one be as well. As investors therefore we are much better off investing regularly, not trying to time the market and staying invested over the long term.
One mention of the dramatic transformation that the markets have seen between 1990 and 2020. We have gone from paper based and scam prone trading to having one of the best regulated and technologically sophisticated equity markets in the world. Within the market what has not changed is the vibrancy across companies of different sizes to generate growth and reward shareholders. What has also not changed is that quality companies with strong managements and conservative balance sheets have been the greatest wealth generators. What has constantly changed is the leadership – between old economy manufacturing, commodity players, consumers, banking and IT – and we can be sure that this will keep happening in future as well as some new players come and disrupt the existing order or some new sectors emerge. So join the ride but make sure you have your seat belts on!
As a fund house, we believe the market is at the cusp of a long term cyclical growth trajectory. Periods of pain during economic cycles are often times where economies pivot as they weed out pains of the previous cycle. A strong growth oriented government, significant growth tailwinds, global supply chain re-alignment and highly skilled global workforce make India an ideal candidate to lead the next growth cycle. This bodes well for equity investors as well.
The upcoming Union Budget 2021, is likely to target job creation & reducing income disparity. The government would ideally approach this through a dual pronged focus on kick starting the investment and consumption cycle. We believe that FY22 would be probably the year of fiscal spending and hence do not expect major fiscal consolidation. While this may look negative in the short term the policy directive is a clear indication that the reformist government will focus on long term gains over short term wins.
In summary, India has been a land of opportunity for investors and we are constructive on the growth story that is India. Sensex @ 50k is just a number echoing the growth of the economy. Investors should follow a disciplined approach to investing and plan their investments in line with their financial goals.
Happy Investing!
(The author is the Head Products & Alternatives, Axis AMC. Views expressed are his own.)
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