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Enjoy the corrections in Indian Stock Market

Yes, you read it right! I  like the market corrections. The corrections alone will give more opportunities to enter into real multibagger  stocks.

Actually there is no label that can be found on stock  as ‘multibagger’

The good price, good business performance, corporate actions and favorable environment makes a stock as multibagger over a period. No body really knows what could be the price for any particular period.

But a correction gives the opportunity to enter as we observed the stocks and its situation over the period.

Let us look back on some the corrections that had happened in the past with the Indian Stock Market:

Brexit:

Brexit is one of the many things that was most discussed and thought about – What are the possibilities after Britain’s exit from EU”, this was the question in many peoples mind. This question reflected in the Indian Stock market also. What will happen to Indian businesses that have direct or indirect relation with Britain.

Markets corrected for a day or two. I saw discussion in some of the forums and WhatsApp groups. There were people saying that more countries will follow suit.  This is the time to exit the market. But Indian businesses went on as usual. Markets bounced back.

Trump:

One of the most funny and scariest subject discussed in markets and among investors was Trump’s Win.

Our markets also fell in that week. Corrections happened whenever adverse comments made by Trump and his team.

But markets subsequently rallied.

Why?

Let us think. What has Trump to do with our local commodity chemical company?

What has Trump to do with Patanjali or Basmati rice producer?

What has Trump to do with the supplier of indian railways?

Nothing.

But that is market for you. Markets always go through irrational moments and would be influenced by the  flash news. And then it shall bounce back.

 

Surgical Strike:

If you remember, the markets were raising on the day when news of surgical strike announced. Once the news announced many stocks dropped 2 – 20%.

Why?

Our markets are like our two wheeler stands. One vehicle falls and then everything will fall. There wont be any rationale in those falls

Moreover our markets are with full of trading activity. The trader just press sell button whenever they hear some negative news. They don’t have time to think or evaluate.

When everybody sells, well the markets fall!

And the result – No buyers. Eventually, our retail investors also sell because of panic.

 

Whoever had invested on the day of surgical strike or after demonetization made 100% returns in one year.

 

That brings our next topic of discussion, the biggest event in our days

Demonetization (and the Budget):

Today, we are talking about very good Indian stock market performance in 2017. How do we measure the market performance? We are measuring it for one year.

But one year back the market was low because of demonetization and it even achieved low on the budget day.

Subsequently markets were  recovered.

How does this performance comes? The performance comes only because of the investors who bought the stocks on those times and reaping the results now.

 

Having discussed these, are all the corrections short lived? Not necessarily.

There  could be prolonged bear markets also. One has to analyse between the short term “irrelevant” corrections and structurally bearish markets

 

We can keep on talk about the corrections and the opportunities that they had given. These opportunities will keep on coming.

The proper observation and analysis will help us to enjoy the correction.

The corrections are most of the time joy and healthy. Let us welcome it.

India is a growth story. The corrections will give more joy in growth markets.

Happy Investing!

June 6, 2017

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