November 19, 2019
“They who can give up essential liberty to obtain a little temporary safety deserve neither liberty nor safety” – Benjamin Franklin
For quite some time most investors and experts alike were waiting for correction in the stock markets as the valuations had stretched much far than their long term averages. Markets had corrected by about 8% from its peak. We attribute this correction to three reasons – (i) High valuations and profit booking (ii) Long term capital gains tax provision in the budget & (iii) Global sentiments
The above mentioned reasons did give an opportunity to the investors sitting on fence but how many of them could take advantage of this correction. It is inherent in our psychology to follow herd mentality. So when markets go down, we foresee markets only going down further or vice versa. We try to do some bottom fishing when markets are abuzz with doomsday news. A few do gain some success but most investors are found murmuring ‘I was about to put money at this level, alas I should have done it.’
This is in the nature of stock market to create new highs and then fall from there before starting a new journey to scale another high. Indian stock markets have come down by a good margin from its peak. And since last expiry it has remained positive for over 3-4 sessions. So is the sale in the current market is over. If you ask us – our simple answer is “Sir, we don’t know.”
The issue of long term capital gains tax is still relevant and may influence some profit booking for big investors towards the end of the current financial year. But can we say it with certainty – NO. It is very difficult to guess next move in the stock market. What we at InvestmentMitra, based on our academics and experience, know is that best method for profit booking or taking advantage of opportunities is rebalance your portfolio and always keep it aligned to your desired asset allocation.
Currently bond markets have also thrown good opportunity to invest in good quality bonds, especially tax free bonds, to earn higher yields than half a year back. As investor you must look at your portfolio allocation and benefit from the opportunities available in equity and bond markets. But most important of all – “Always keep some cash reserves to exploit a better opportunity.”
InvestmentMitra wishes you a Very Happy Holi in advance. As you splash different colours on your loved ones on Holi, do splash different investment products in your portfolio for different asset class.