In a recent report, Motilal Oswal said, “In the last 25 years, the Indian stock market has witnessed at least 22 occasions when, intra-year, it has seen a drop of 10 percent or more.”
The report stated that equity market returns are non-linear and investors should expect sudden corrections at regular intervals.
The report underscores the need for the investor to be patient and to take a longer-term view. It identifies the global financial crisis in 2008 as one such spur. During that year, the Nifty 50 Index slumped 52 percent. Those very investors who hung on to their portfolios during the downturn went on to earn significant returns in 2009 when the market rebounded 71 percent.
It further indicates that the days of effortless market gains, wherein broad rallies lift all sectors, are gone. For now, the focus should be on strong fundamentals and long-term growth prospects, rather than short-term flows. Investors need to be choosy and not join the herd in popular stocks; investments must be in those companies with longer-term and sustainable growth prospects.
A key takeaway from the report is India’s growing importance in international equity markets. India’s market capitalization has surged upwards, making a leap from the 17th position globally in 2013 to 5th today. Its contribution to global market capitalization also increased from 1.7 percent in 2013 to about 4.3 percent now.
This growth has been attributed to strong macroeconomic factors in the country. These include steady GDP growth, low inflation, manageable fiscal deficits, and high foreign exchange reserves. The Indian rupee was showing resilience despite challenges like FII outflows of around USD 12 billion. In that aspect, it reflects the underlying strength of India’s economy.
The report also underlines a positive trend in household savings. More and more Indian households are increasingly investing in equities, making stocks a favorite class of assets. With the continuous growth and diversification of the Indian economy. The country remains a key player in the global equity market.
The Motilal Oswal report, in conclusion, has made a pointy stress that the volatility characterizes the nature of the stock market and one must keep the long-term perspective in view. Only then can India’s rising position in the global market and strong economic fundamentals justify the case for continued investment in Indian equities.
ANI
