It's time to get fully invested !

The month of September saw relentless pouring in of bad news from various quarters. Selling pressure spread from equity to other asset classes like gold, commodities and currencies. In the near future there is no relief likely from both local as well as global economic front. Policy paralysis in the domestic political landscape does not seem to be ending anytime soon. Government seems to be fighting a losing battle against inflation. Supply side constraints which are the major reason for rising inflation are not being tackled, while continuous monetary tightening is bound to choke the Economic growth at some stage. Globally also, the picture is looking very gloomy. Despite Germany’s decision to bail out Greece from its current economic mess, situation across Europe is still very murky and will take a long time to get sorted out.

In our markets too we saw selling pressure spread across different segments. Companies benefitting from domestic consumption which were so far spared from the massacre in our bourses got engulfed in the latest round of selling.

Though more downside cannot be ruled out. More than ever before, we need to keep in mind the long term growth trajectory of our economy and markets. Though poor governance and global turmoil will impact our growth significantly in the short term, yet the demographic strength and strong economic fundamentals are likely to make this slowdown appear as a minor blip in the long term. Also great buying opportunities usually appear in these stressed times.

In terms of valuations we have reached levels which are usually the bottom of the bear market phases. We are however still trading at a premium to the levels which the indices reached during the Economic Crisis of 2008 and the Software Crash of 2000. Things no doubt could get worse especially if the current economic turmoil reaches catastrophic levels. However there is no certainty that things could get that bad. Moreover, waiting for a disaster to happen would deprive you of the wonderful buying opportunities present now. Future is always difficult to predict and it is impossible to time any market to perfection. Smartness  lies in buying whenever valuations have reached attractive levels. There is no denying the fact the current levels are compelling going by historic trends. Hence it is time to get fully invested. If things deteriorate any further then you may have to hold on to your investments for a longer period of time. Therefore only the money which can be spared for the long run may be invested in equities.

The beaten down sectors like infrastructure, capital goods, banking, automobiles, IT and metals offer the best buying opportunities.