2009…The Recovery Year after a fatal 2008….America has seen what appears to be a Bear Market Rally…so 2010 may see reversals there…..China has seen a doubling in Equity and Real Estate from 2008 lows…early signs of a Bubble forming in years ahead
…..and our Bharat is sandwiched critically between the two…America and China…West and East…clearly 2009 was a great surge back year from October 2008 and March 2009 Lows…but clearly 2010 will not witness a three digit percentage gain from these Sensex levels of 17500…the base is now higher and the macro valuations fairer
….so to beat Index benchmarks and chase alpha,strategy will have to be stock specific with a bigger exposure to low cap and mid cap scrips….thus the risk increases…and thus this strategy may not suit or be appropriate for conservative and even moderate risk profiles….they would best be served by sticking with the Large Caps…Reliance and Larsen
……there is optimism for Indian Equities in 2010 with encouraging GDP and Corporate Earnings Growth rates in the face of high fiscal deficit and food inflation…and the intact Infrastructure and Consumer Story for years to come…..Nothwithstanding any hiccups,the FII Flows and Domestic Insurance and other Institution Flows into Indian equity will continue to be strong in 2010…there is every indication of this..over US $ 10 billion from each stream
…….monies will flow to where returns are more certain and visible and therefore the risk is less….India simply has to be the Investing destination
……I’ve made this equity argument for India repeatedly over the years,so don’t let anyone sway you away from India….as an Indian,you have the right to participate in the returns that this Incredible India story unfolding before you will give you….cautious ,yes,…but cynical and critical and skeptical and you’ll only be grudging those who have participated
……so I reiterate as we close out 2009….Continue to go Long on India Equities for the Long Term…..just look back and contemplate for a second….being fearful,cynical,scared, critical and skeptical held you back from participating in this fantastic recovery in 2009
…believe in the power of Compounding…our government has a Five year Plan…you too have one for Equity…Beginning 2010 to end 2014….Bank Deposits may be safe….. but a compounded 8% annual return will take your Rs 100000 to Rs 146933 in 5 years….post Inflation and tax the real returns would probably be nearer 0 % !
…..Equities will offer you an opportunity for higher returns…so you simply have to have some allocation to this asset class,based on your risk profile
History is on your side…Last Ten Years from beginning 2001 to end 2009 the Sensex has given a 12.75% annual compounded return rising from 5210 to 17350 with a low of 2828 in 2002 and a high of 21207 in Jan 2008…..over a longer period the return is even higher….a compounded 16% annual return will more than double and move Rs 100000 to Rs 210034 in 5 years…a 20% compounded return would take it to Rs 248832
…..and if you’re chasing alphas and have a multibagger mentality indicating an aggressive mindset,you’re probably looking at converting Rs 100000 to Rs 1000000 inside 5 years or even quicker in Equities !….that’s achieving a 60% compounded return in 5 years !….look for the next Infosys…the next Reliance Industries…the next Bharti Airtel…..this is more achievable and advisable than relying on some magical technical or trading software that seem to be mushrooming more and more everyday !
…Excited !?….Think more on this line….in 2010,If you begin with Rs ONE CRORE and apply a compunded return of 100% every year for 10 Years then how much would you have on hand at the end of 2019 !?….in practical terms look for a scrip doubler every year !…or concentrate on a few scrips that have this potential to create magic over the years
Rs 1024 CRORES !
Now,I’ve really got you excited !…maybe it’s too much of the Christmas Spirit…literally and figuratively!
Cheers !….Think about it…but not so much that it interferes with your decision to Invest in Equities….Begin more firmly and surely,albeit selectively, in 2010