INSUBCONTINENT EXCLUSIVE:
Calendar 2018 was a very testing year for Dalal Street
Investors in midcaps and smallcaps bled profusely
Largecaps, with exception of a handful of stocks, have also gone down
Equity returns are not linear
Equity as an asset class does not give steady, regular returns.
Calendar 2017 was a year of super-normal profits
On a two-year timeframe, investors have still made positive returns
It is recency effect and availability bias which play their tricks with our minds and make us feel that market has let us down!
I will not
hazard a guess on what market will be like in 2019
Not because I don’t want to, but simply because I don’t know how to
I know at this time of year, it is fashionable and probably expected to prognosticate about next year, but I will refrain from that.
Instead
let me talk about a few important things that we should keep our eyes out for.
First, let’s talk about elephant in room and get it out of
Historically, Indian market has had large swings immediately before or after general elections.
However, if we have a two-year view,
elections and their results don’t matter much
In 2004, Nifty went circuit down post-elections, and yet market went on to have a great bull rally for next three years.
Exactly, opposite
The market went circuit up and then did not do much for next two years.
In US elections, when Trump won, markets were expected to crash, yet
Recently, in state elections, ruling party lost in three major states, yet market went up instead of falling as was generally expected.
I
would argue that not only is it not possible to figure out election results, but it is not important to do so for investing.
Next is
It is something which is too difficult and complicated to be able to infer implications
One thing in India’s favour is that most of India’s economy is domestic consumption-driven and not dependent on either US or China.
Oil
prices can destabilise our economy to a great extent
How they behave in 2019 and beyond needs to be on our radar as investors, because they can impact currency and interest rates
We, as a nation, need to start actively looking at renewables and at reducing our dependence on oil imports
Calendar 2019 is a year as good as any to get started on this.
Job creation in age of increasing automation is going to be an ongoing
India needs to be able to support its huge population with jobs
We are in a peculiar situation with scarcity at both ends of spectrum
Industry doyens keep talking about unavailability of employable people
On other hand, our youths have no jobs
Should we be focusing on vocational training instead of trying to push everyone to get a graduation degree What about quality of education
being imparted at various levels
While these have nothing directly to do with equity investing in 2019, tackling these problems by an
enterprise can provide long-term mega-themes.
India is a $2.5 trillion economy today
At current pace, we should double in 8-9 years and then double again in another 8-9 years
In this while, market cap should also go up substantially from current levels, because a lot more of large unlisted players would come to
capital markets through IPOs.
At a 100% market cap-to-GDP ratio, we are looking at an approximately $10 trillion market cap in 16 to 18
That is a five-fold rise at market level in this time frame
Individual stocks will definitely do much better
So, keep an eye for longer-term wealth creation stories, be invested in a well-chosen portfolio of stocks and fasten your seat belts for a
