Valuations are too compelling to be ignored for a long term investor

March has been a disappointing month as far as markets are concerned. The year began on a promising note and we saw a decent rally in the first two months backed by enormous liquidity pouring in from overseas investors. However a series of disappointing policy announcements from the government have spoilt the sentiment on the street. This government apathy together with weakness in the global markets have endangered the nascent bull market.

On the positive side, India with a meager six percent GDP growth still stands out as a safe haven with a potential to generate handsome returns in the long run. Though inflows from foreign institutions have reduced over the past few weeks, yet they are likely to pick up once market stabilizes and valuations become very attractive once again. Also despite such a dismal governance, things are still fairly positive at the ground level. Many of the well managed companies are still growing and delivering impressive numbers. Sectors like two wheelers, pharma, fast moving consumer goods, lifestyle and Information Technology are still growing at remarkable rates. Moreover stocks in sectors like banks, infrastructure and capital goods are available at very cheap valuations. Though there are concerns regarding their performances going forward and many of the segments like power generation face a bleak future due to fuel constraints, yet for a long term investor these valuations are too compelling to be ignored.

We recommend investors to hold on to their exposure in the stock market. Remain invested in quality stocks enjoying leadership position in their respective segments. Also use further weakness to gradually add more stocks to their portfolio. However grim the outlook might appear, market is offering a great opportunity for buying with a long term view.