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India's Third Giant Leap

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Samvat 2076 Begins...
Sun, 27 Oct Pre-Open

Dear Reader,

Let us start of by wishing you a very happy Diwali and a prosperous year ahead.

As Samvat 2075 comes to an end, let us take a moment to review the year gone by.

Despite the latest fall, Indian markets registered gains on a YoY basis.

In the Samvat year gone by, Nifty returned nearly 10.8% return and Sensex 9.8%, but that growth was limited to a handful of stocks. This is why most investors' equity portfolio bled to make Samvat 2075 a forgettable year.

The ride has not been smooth. Benchmark indices have remained volatile owing to various global and domestic economic concerns.

The sharp deceleration in the economy, GDP growth fell to 5% in Q1FY20, the lowest growth in 25 quarters, disappointed investors.

The year which was also marred with many headwinds in the form of economic slowdown and stress in the financial sector prompted the government to announce a sharp reduction in corporation tax rate and a fillip for investments in manufacturing.

Despite a landslide victory for the incumbent Modi Government, markets did not sustain as economic issues were not accorded priority as expected.

During the year, FPIs shopped for Indian equities worth nearly US$10 billion to mark their highest purchase in the last five years. On the flip side, local investors including mutual funds bought shares worth US$7.4 billion during the period.

The emerging market slowdown led by a slew of economic events had its effect on Indian share markets. Some of the major global events that weighed on Indian benchmark indices were rising crude oil prices, a weakening rupee, the ongoing US-China trade war, and a brewing liquidity crisis in the Indian economy.

Regardless, the markets went on to hit all time-high levels. But that did not last for long. Benchmark indices fell swiftly thereafter. The Sensex shed over 10% from its June peak after the foreign portfolio investors (FPIs) started paring their exposure following the government's proposals for enhanced surcharge on short-term and long-term capital gains tax in its July budget.

Since then, the equity market has remained range-bound even though the proposal was subsequently withdrawn.

While the Indian economy reels under pressure, the India Story is far from over. A lot of effort is still needed to repair the economy, as we move towards a new year.

However, this is also the best time to reassess your portfolio and load up on quality stocks as the uncertainty and volatility clear up.

Legendary investor Warren Buffett would agree when we say that only when the tide (i.e. liquidity) goes out, will investors find out which stocks were the strongest.

Your portfolio must be reeling under some pressure after the recent melt-down, but now is not the time to panic. We believe investors will be far better served if the focus is on individual stocks by following a bottom-up approach to investing.

As always, we recommend buying stocks with solid fundamentals only when they are available at attractive valuations. Time will then work in your favour and provide you satisfactory returns.

In short, ignore the noise, stick to fundamentals and you should do well.

Have a great year ahead!

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

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