Instead of predicting short-term movements in the market, focusing on long-term investing strategies is generally more effective. This means investing in companies with strong fundamentals, a solid track record, and growth potential.
Mutual Fund investment: Market fluctuations are a huge reality in the current times. The India VIX, which measures market volatility using the Nifty 50 index, saw a major correction after the Lok Sabha elections. The VIX has eased down to 13.16 from its peak 31.17 on June 4, when the Lok Sabha elections results declared. Several market analysts have said that the fluctuations were due to Lok Sabha elections.
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Investors dealing with the current volatility need to understand that volatility is a natural part of market movements, and trying to time the market perfectly is nearly impossible.
Instead of predicting short-term movements in the market, focusing on long-term investing strategies is generally more effective. This means investing in companies with strong fundamentals, a solid track record, and growth potential. By holding onto these investments for the long term, you can ride out market volatility and potentially earn higher returns over time.
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Business Today spoke to Akhil Chaturvedi, CBO &Executive Director, Motilal Oswal Asset Management Company about how to navigate such market ups and downs.
“It’s also important to diversify your investment portfolio, spreading your money across different asset classes, industries, and regions. Diversification can help reduce risk and protect your investments from the impact of economic downturns or the underperformance of a particular stock or sector,” Chaturvedi said.
He highlighted sectors that are good for investment at all times. Here is the list:
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1. Private banks: Chaturvedi noted that FY2023 was a year of 151% nominal growth of GDP. FY2024 is expected to be just about 10.5% (budgetary assumption). This implies that the system lending growth which would be required to fuel this growth would also be lower.
“Lower inflation would mean corporate working capital focused banks would find it more difficult to grow. For banks focused on retail, however, it should prove to be business as usual and they could deliver stronger growth,” he added.
2. New-age tech businesses: Chaturvedi said the ne-age businesses have now built up their brand recall and have a significant number of clients. Most are now more focused on profits vs market penetration. The reduction in losses in many of these businesses have been very sharp and it is quite clear that it would sustain over a period of time.
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3. Hospital infrastructure: There are two drivers for this space, Chaturvedi noted.
1) India is rapidly greying and age cohorts of over 60 are seeing sharpest growth in numbers. This is the age when health requirements increase and the people have the ability to pay through savings and through health insurance.
2) After Covid, health tourism is now starting to increase and normalize as patients are again travelling to benefit from low cost Indian health services.
4. Premium discretionary spaces: Higher incomes have driven consumption in India over the last decade. Middle-class households, which now represent over 30%of the population, has enjoyed strong annual growth from 1995-2021, leading to the bulk of the expansion in premium categories.
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“With the growth of the economy, the growth in the middle class is expected to continue and this could provide a fillip to this trend. Growth in premium products has expanded at a faster pace than mass-market equivalents across various categories, notably in consumer, autos and real estate. While the trend was visible and anticipated earlier, there were very few companies to invest to benefit from the trend because the overall space was very nascent and companies were very small,” Chaturvedi said.
5. Engineering and defence Capex: ‘Make in India’ continues to be a big focus of the government. The new NDA government is expected to push the initiative further.
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“India continues to endeavour to build new age manufacturing expertise. Companies with technologies to help India achieve its dreams have a good chance of continuing to show strong order book growth. Government was the sole driver of capex earlier but now private sector is also beginning to participate. Debt to Equity ratio of large listed companies has fallen sharply over 2016 to now and is expected to continue to fall. Banks are in good health as well. Housing, the other big driver of capex, is also seeing an upswing,” said Chaturvedi.
6. China -1: The world now wants to de-risk away from China. Earlier countries wanted to have another supply source apart from China but now increasingly the sentiment is that we would source from anywhere but China. Many businesses are benefiting on this count.
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“The Government of India has rolled out Production Linked Incentives (PLI) schemes across the board and many companies have come up in the Electronic Manufacturing Services (EMS) space. Chemicals are a big beneficiary of this move across the world. Listed companies are increasingly looking at new growth areas such as Li Battery manufacturing, solar cell manufacturing, hydrogen electrolysers, EVs, etc,” Chaturvedi said.
7. Mid-sized IT companies: Many large IT companies have seen issues in BFSI and discretionary spends. However, smaller companies focussed on growth verticals have done relatively better. This trend could continue as verticals like airlines and hotels benefit from travel reflation, auto vertical benefits from upgrades to EV and connected cars, telecom vertical expected to benefit from 4G to 5G transition.
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“Europe which was behind the US in outsourcing is now joining the bandwagon and larger midcap IT companies benefit from having crossed the size threshold and are benefiting from qualifying for increase in larger deals. Many companies have seen credible changes in top management,” Chaturvedi noted.
8. Telecom: The industry’s exponential growth over the years is expected to be primarily driven by affordable tariffs, wider availability, roll-out of Mobile Number Portability (MNP), expanding 3G and 4G coverage, evolving consumption patterns of subscribers, Government’s initiatives towards bolstering India’s domestic telecom manufacturing capacity, and a conducive regulatory environment. To further expedite digital connectivity, the Government has approved the auction of IMT/5G spectrum for deployment of 5G services within the country.
Ultimately, successful investing requires patience, discipline, and a willingness to continuously learn and adapt. By understanding how markets work and staying focused on long-term goals, investors can increase their chances of making smart decisions and building wealth over time.
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“We believe as we go forward and growth becomes less omni-present, the high quality growth style of investing should start to get very competitive vs the value style of investing. And these spaces should continue to generate a significant growth going ahead as well,” Chaturvedi added.
