Every rupee invested in domestic stocks now is actually worth double of every rupee invested a year ago. Thats because the painful correction through September-October has left hundreds of quality stocks on discount sale.
Smallcap czar Porinju Velliyath made this observation in his latest letter to investors, where he says every rupee withdrawn now, if left invested, would more than double in the near future.
Porinju took a massive hit on his portfolio, comprising largely of smallcaps and midcaps, in the recent downturn. Sebi data shows the Kochi-based investors PMS took a 20 per cent knock in September, 3.6 per cent in October and another 2 per cent in November. The fund had gained 6.33 per cent and 3.70 per cent in August and July, respectively.
After a volatile October, Nifty recovered most of its losses in November. But Porinju calls this recovery deceptive as only 15-20 blue-chips actually made up that show. “There has been total inactivity in the market,” Porinju said, adding that a recovery is due anytime now as factors that caused the market pain – be it spike in crude oil price, weakening rupee or trade war – have reserved dramatically and September quarter earnings have shown a solid trend in domestic consumption and a promising outlook for the economy.
He says recent market response to macro headwinds only proved how meaningless it is to predict such indicators and how these are of no help when it comes to stock picking.
The Founder & Portfolio Manager at Equity Intelligence India, who in recent weeks has made confident projections about the chances of Modi governments return to power for a second term in 2019, now says elections do not matter to market. “For long-term shareholders, it all boils down to earnings and valuations.”
Porinju says there is nothing to do in this market for investors who have put in money with a longer horizon. “This, too, shall pass,” he wrote. The prevailing bearish trend will reverse and turn into a 2009 kind of bull run. “Hundreds of stocks, including many of those we are holding, would be up more than 100 per cent by next year,” he said.
Porinju reminded his investors that hurried decisions taken with a myopic view in fear and panic after such a dramatic fall have proven wrong time and again in the past. He insisted this is the best time to make fresh investment in stocks, regardless of what the election outcome is and which side the trade war turns to, as the discount sale wont last long.
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ET Markets
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