Pehla Kadam - Baby Step in the field of Investment

I had an opportunity to attend grand finale of Pahla Kadam, an initiative to educate the investors by CNBC Awaz alongwith AxisDirect, SBI Mutual Fund. It was good opportunity to read the mind of Fund Managers of leading MFs at a common platform. They tried to impart the right knowledge to the viewers, empowering them to make informed decisions about their investments.

Whether it is Navneet Munot of SBI Mutul Fund or Arun Thakural of Axis Securities, they agree that there is a historic evidence that  investment cycle   normally run for seven years, for two three years market will move upward, one or two years goes steady and then it shows the downward trend. So whenever there is an downward trend the investor should not panic, it is right time to invest because the market will recover after few months.

Another tip from the Fund Managers  is to be patient. One should hold his investment for few years only than it will give good return. He should not try to sell his equity when the market is down.

Recent Trends

After a prolonged uptrend momentum in the Indian market and across the globe, it sharply felt into correction territory in current month plunging 6 percent each on major market headlines from initial highs.

The global concern revolved around the spike in the bond yields coupled with fear of rising inflation across the developed economies.

The interest rate hike by central bank around the world on the backdrop of rising inflation and higher yields has put the equities market under uncertainties.

However, the global sell-off and its slipover into Indian equity market presented an opportunity for the investors to hunt for value proposition across the segment of scrips.

Warren Buffett, who is probably richest investor in the world, underlines the basic fundamental of staying invested for a longer duration and keeping heads away from the short-term market fluctuation. His basic principle of investment revolved around buying stocks at a cheaper level and holding them till it unfolds the objective.

Thus, with the fundamental of Indian economy appropriately positioned and robust structural reforms, the short-term volatility enables to operate fundamental of buying quality stocks at a cheaper level for the investors in India.

The fall of the market in 2008 post-financial crisis and its replica during 2011, wiped out billions of wealth across the global, and similar magnitude can be seen in the current phase.

However, a historical trend has shown a glimpse of market recovering over a period of time despite a prolonged turmoil.

Therefore, it turns out to investment principle of Warren Buffett, where it is emphasised to keep away from the investment portfolio and to stay invested as long as it is appropriately invested for goals.

However, it will be prudent for an investor to re-balance the investment portfolio if the market drop continues to prolong than the threshold.

Given the fact that our Indian market is poised for the bull regime from a long-term perspective which is supported by earnings recovery, and fundamental soundness as seen in the current quarter after a sluggish growth for past 3 years, it facilitates to trade-off Warren Buffett’s theory of value investing.

Therefore, sticking to a basic principle of investment and holding a strong fundamental conviction, the Indian investor has a larger propensity to create an overwhelming wealth in millions to billions from equity market despite a short-term turmoil.

It narrow downs to screening a quality company despite facing a downtrend but has the edge to deliver multi-fold returns over a period of time which comes from a humble strategy like Buffett.
And more importantly, every short-term consolidation can be used as buying opportunity which also brings down the average cost of investment and thus munificent profit margin at the hand of the investor.


Now the tips for sound investment 

1. Investors should always look at opportunity

The first thing which investors should look at is ‘opportunity’. Without opportunity, there can be no economic activity and without economic activity, there can be no profitability.

So the first thing the investor should look for is opportunity and retail is one industry which has one of the highest opportunities in this country. You can do internal things to create demand, but it is too taxing and that is not the favorite place where investors want to invest.

2. Retail is next big thing for India

Retailing is a great opportunity and the winners will emerge in 5 to 10 years. It may be better to invest more when the winners emerge. For retail, the opportunity is unbelievable and expects it to go by five times its size in the next five, six, seven years. So that is the opportunity. Approximately $500 billion is the size of the retail market in India and organised is about 8 per cent. There are going to be a lot of most specialized retailers. If you look at the billionaires list of any country, two people are always from real estate and retail. So retail has got many more billionaires to come

3. Competitive Culture

The next factor to look at is competitiveness. In a free society, what one needs is an opportunity, one has to become more competitive and profitable at the same time.
Another important factor one should look before investing in a company, is its culture. The company is more often than usual can be driven by its culture. They can be driven by barriers which could arrive because of maybe taxes, location, capital etc. So investors should try and understand the company in its competitive ability or what it already has in relation to the opportunity and the price


Demand for the product

Invest where demand naturally exists. This is very important part of investment. Roti, Kapda Aur Makan these are the basic needs of human being so the companies working in these segments will normally do better. Pick up good companies in these segments.


Small cap which can become large cap

Investors should look at companies which have the potential to become large caps. What you need for that, you need scalability.