Stock market outlook
post
Lok Sabha election results
:
Raamdeo Agarwal
, the Chairman of
Motilal Oswal
, believes in the importance of focusing on the fundamentals rather than getting swayed by short-term market fluctuations in equity investing.
The recent market volatility, driven by election results and exit polls, should be considered as noise, he says in a column in ET.
Instead, investors should focus on the fact that the BJP remains the single largest party, and the NDA has the mandate to form the third successive government, ensuring continuity in development reforms and PM Modi’s vision for India’s future, he says.
According to Agarwal, India’s economic fundamentals remain strong, with robust GDP growth, substantial foreign exchange reserves, low inflation, and the possibility of interest rate cuts by the RBI.
Additionally, good monsoons and positive outlooks from rating agencies contribute to the resilience of the Indian economy. These factors are expected to drive corporate earnings growth, a key driver of stock markets, he says.
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The increasing participation of retail investors in the stock market, evident from the growing number of demat accounts and rising monthly SIP flows, has helped the markets absorb significant FII selling in the recent past. FIIs may even use the current market correction as an opportunity to re-enter India, he adds.
Agarwal quotes Benjamin Graham, “In the short run, the market is a voting machine but in the long run, it is a weighing machine.”
The current market reaction to the election results may lead to some short-term derating of India, but this will likely be offset by corporate earnings growth of around 15% over the next year, he believes.
Long-term investors should maintain their belief in India’s solid economic fundamentals and expect the market benchmarks to double in the next 5-6 years, he says.
Raamdeo Agarwal advises new investors to follow Warren Buffett’s wisdom: “It’s wise for investors to be fearful when others are greedy and be greedy when others are fearful.”
The current market fear, driven by fluid politics, presents an opportunity for investors to believe in India’s strong economic foundation and invest with a long-term perspective, he says. “I advise you to believe in India’s solid economics and be somewhat greedy,” he concludes.
