Utilise Volatility Start Accumulation
Indian markets have witnessed sharp correction since the start of the year 2016 and are down by around 9% on the back of extremely weak global markets. From the all time high levels in March 2015, BSE Sensex, Nifty 50 is down by around 19%. Many of the bluechip stocks have corrected far higher than headline indices and are trading at or near 52 week low levels. Currency devaluation by Chinese government to support their declining exports and unprecedented fall in commodity prices particularly crude oil prices are the main reasons for the global capital market volatility
The correction has provided an excellent investment opportunity for long term investors to start building equity portfolio. Historically it has been observed that investment in equity markets post correction of more than 15% has yielded handsome return in subsequent period.
Exhibit 1: Returns in subsequent rally post market fall of more than 15% since 2005
We believe that the recent breather in the last one year forms part of the larger bull market which began since mid 2013 and provides an attractive incremental buying opportunity for long term investors. We expect the markets to embark upon the next up move after conclusion of the current corrective phase. Good quality stocks which have corrected significantly or largecap biased diversified portfolios or funds should be considered for investment in a staggered manner over the next 2-3 months.
Indian markets have witnessed sharp correction since the start of the year 2016 and are down by around 9% on the back of extremely weak global markets. From the all time high levels in March 2015, BSE Sensex, Nifty 50 is down by around 19%. Many of the bluechip stocks have corrected far higher than headline indices and are trading at or near 52 week low levels. Currency devaluation by Chinese government to support their declining exports and unprecedented fall in commodity prices particularly crude oil prices are the main reasons for the global capital market volatility
The correction has provided an excellent investment opportunity for long term investors to start building equity portfolio. Historically it has been observed that investment in equity markets post correction of more than 15% has yielded handsome return in subsequent period.
Exhibit 1: Returns in subsequent rally post market fall of more than 15% since 2005
We believe that the recent breather in the last one year forms part of the larger bull market which began since mid 2013 and provides an attractive incremental buying opportunity for long term investors. We expect the markets to embark upon the next up move after conclusion of the current corrective phase. Good quality stocks which have corrected significantly or largecap biased diversified portfolios or funds should be considered for investment in a staggered manner over the next 2-3 months.
Happy Investing
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