Hello and welcome to NSE presents: Invest - O - Cast (an exclusive investor podcast) powered by Moneycontrol. I'm your host Hrishi K and this podcast is all about getting your money to make better investments for you in the new financial year.
With budget and elections making way into 2019, a lot can be expected from the markets as well. The stock market in India has been in great shape for some years now. As in any secular bull market, there are tactical bear markets, and, at a certain point, an end of the bull market. However, the New Year comes with a lot of questions. How is the stock market going to perform in the months to come? With the budget announcements, are different sectors going to perform differently? And will the unpredictability of the election results affect the stock market in any way? Whichever way the markets go, all you need to do is be prepared. But how can one do this?
Well, now's your chance to sit down, relax and listen to the best of advice from industry experts on Invest - O - Cast, as we have decided to get you just the right amount of wisdom from the experts to get through the slightly unpredictable year ahead.
And while we do this, we are going to help you carve out the best way to make money work for you this year. Because, being aware and informed will help you be a little extra prepared for your financial goals and investments.
National Stock Exchange (NSE) with the help of Invest – O- Cast (An exclusive investor podcast) Powered by Moneycontrol is committed to break the limitations of geographical boundaries and reach investors across the country. In today’s episode we talk about the stock market outlook for 2019 with the markets closing out the year in a correction and what are the seven critical trends to watch out for?
And to get you the most critical insight on this, we have with us today Dipan Mehta. He is the founder Director of Elixir Capital; NSE member and is an expert in equity fundamentals and the stock markets.
HK: Hi Dipan! Wonderful to see you, we are really glad to have you here today.
DM: Thanks Hrishi! Thanks for having me really excited to do the show with you.
HK: Lovely! Let’s start with knowing a little more about you and the most importantly your efforts behind financial education and awareness.
DM: See I think investor education has been very close to my heart since I started my career and I have done several investor camps for the NSE as well as for CNBC and I truly feel that investors do require a certain amount of education when they’re coming into equities and equity investing because there are some nuances which need to be understood and you need to have a proper strategy and understanding about this particular massive wealth creating opportunity. So I feel that investor education will certainly go long way in helping the average individual or the family achieve their financial goals.
HK: But you did say off the mike, you were almost complaining saying you wish more millennials would listen to that?
DM: Yes, absolutely.
HK: Well, we will come to that a little later. Ok, with the market closing out the year in a correction, what really is the stock market outlook for 2019 as far as your concern?
DM: The best way to describe the outlook for 2019 is volatile and many tricky situation with the markets will keep on tumbling going up, going down and the main reason for that is that right from August, September of 2013 this market has been going up almost without a serious correction for almost 4 years or so. Now we have reached a situation where there are many speed breakers right from political uncertainty to interest rates, global scenario, domestic issues, so we’ve reached a situation where earlier it was completely clear blue skies but now you cannot say the same, it is quite cloudy. And this year like the last year this year at least the first half will be quite challenging for the investors to navigate.
HK: NSE Presents: Invest – O- Cast (An exclusive investor podcast) Powered by Moneycontrol is all about helping people learn about their finances on the go…and we must have some advice from our expert today which is Dipan Mehta for the listeners on today’s topic of five critical trends to watch out for in the stock market outlook for 2019. Ok Dipan, let’s talk about the first and most important trend. Trend to watch out for.
DM: I think political uncertainty. Now that the budget is over and done with I think a lot of focus will go on to who is going to form the next government will the NDA continue to govern the country or will we have a new combination, will it be a coalition government. Even after the election result and then all the way up to the first budget of the new government, now that also will be watched closely because if there is going to be a change of the government it would mean that there is change of policy, a change of a focus, a change of which sectors needs to be encouraged, where the attention of the government is going to be, so many things usually change when a new government comes into play. So a lot of investors domestic as well as institutional as well as international investors are concerned about this political uncertainty and how it is going to play out this theme for at least first half till July, August of 2019 is going to be a political uncertainty and that is going to play in the minds of the investors and that’s where the volatility will be in the markets.
HK: And as far as the sentiment is concerned, in the stock markets you don’t just talk of numbers you talk about sentiments right?
DM: Absolutely! Sentiment is more important sometimes than the numbers itself and sentiments certainly does gets affected by political uncertainty. What markets hate is uncertainty, they like to have clear cut vision, they like to have clear cut road map as to where the country, where the corporate earnings are going, where the economy is going, what the political setup is? The minute you have political uncertainty that automatically it spreads through all aspects, all sectors of the society of the economy, it affects investment plans, it affects decision making at all levels at consumer level, at the business level, at the government level, at the state level, so that kind of causes a amount of paralysis in activity and that is never good of the economy of the country and the stock market so we hate uncertainty of any form and political uncertainty is going to be absolutely heightened over the next few months or so.
HK: Dipan let’s move to the second critical trend to watch out for, would you say interest rates and the relationship with stock markets?
DM: Yes, absolutely! And interest rates and stock markets have a very close relationship. It is quite simple the lower the interest rates the higher the stock markets will go up; it is like an inverse co-relation. And the reason for that is when the interest rates are low automatically you see company is doing well, you see consumption spending going up because of lower interest rates and most importantly the liquidity flows from the debt market and fixed income market into the equity market because the returns in the fixed income markets are lower, so the average investor wants to seek higher returns goes into this stock market. So interest rates and the stock markets have a very close relationship and we have had a change of guard in the RBI itself and what the new RBI governor stands it towards the monetary policy will also be watched quite closely. And there is certainly a scope for India to reduce its interest rates because they are linked to the inflation, inflation has certainly come off so there is scope for us to a reduce in the interest and that does happen and that certainly would be positive for the stock markets and in fact it would counter some of the adverse fall out of a politically you know kind of situation which is not acceptable to the stock market, so there is a complete co-relation government then interest rate reduction will act as a counter balance.
HK: And I am sure you as an expert are watching that Feb 7th date very closely, since there is a change of the guard at the RBI.
HK: Ok, let's move to the next critical trend. We talked about how there is domestic uncertainty, globally also there is tremendous uncertainty isn’t there?
DM: Absolutely, I think globally also we are dealing with the great deal of uncertainty, there is this trade war of US and China and that is affecting the sentiments globally. At the same time we should expect a cyclical down swing in the global economy, so that itself is coming into play this time round and that has effect on many aspects as far as the Indian economy is concerned. Of course the positive aspect is that the commodity prices go down especially oil, steel, non-ferrous metals and India net benefits India, lower commodity prices benefits India and benefits India’s stock market. On the other hand it effects foreign direct investment, it effects foreign institutional investors which are deep pocket investors coming into India it effects their sentiments towards taking more risky bets in emerging markets such as ourselves. Global uncertainty also, global economic uncertainty also is going to be something that we will be continuously factoring in into 2019. And global stock markets also have become quite volatile, so when the dow jones is up 3% or so Indian markets do well and vice-versa. So that is going to be the next big trend which you need to watch out for 2019, so you can see that we are having a culmination of many uncertainties, political uncertainty, uncertainty on the interest rate, now we are dealing with the global uncertainty as well.
HK: So cyclical down turn in that aspect is expected and thus foreign investors have been so gung go about India and the India story, and that’s again might have a question mark on it. Now something we are briefly touched up on at the beginning the critical trend for the millennials and your message to them?
DM: Yeah, well I think that millennials for them, they have to have a strategy for equity and the minute they start saving. The reason is that unlike earlier generations investing in stock markets is going to become main stream. At most point of time millennials will have a large portion of their savings in financial assets and off that large portion would be in equity, so they need to have strategy for investing in equity markets. By strategy I mean what percentage of their saving they are going to invest, who are they going to do it with the mutual fund of the portfolio manager, if they are doing it by themselves, they need to commit time to understand the stock market and which companies and sectors to invest in, if not your better off work in with an expert. So normally millennials are very adept at doing things themselves, its like do it yourself generation but when it comes to equity investing I would urge the millennials to not do it themselves but to do to an expert who can manage their portfolio and who can manage their equity investments and that way they can get the maximum benefit of this fantastic well generating opportunity. That is one part of you know advice to millennials and other aspect is that you need to be develop the right temperament to invest in equity. See equities are very volatile and this is going to be an extra volatile year, other than that also stock markets go up, go down and there is so much of noise and news flow around it, but if you have a right temperament, if you have a right focus, right strategy and the conviction in the India’s story then you will not get rattled by short term movements, by short term drop in the stock prices and have a long term focus which is where the maximum well generating opportunity lies.
HK: So you are saying identify your vehicle, get expert advice, start early. The final critical trend, the India story itself is a trend, so with foreigners and foreign institutional investors having so much faith in the India story you would like to urge Indian themselves.
DM: Absolutely! We tend to get very negative on India from time to time because of what we experience in our day to day life but I think millennials should keep faith in India story and I think a lot have been going for our country and I think the best part is next 2-3 decades or so, demographically we have the best placed nation in the entire world and because of technology, because of various initiative taken by this government and the previous government and the overall thinking within the political circle just how to manage the Indian economy I think we are in for great times over the next few years or so and that’s going to get perfectly reflected in the stock markets. So that come backs to the same point that you should have a nice strategy for investing in equities. If not equity then at least how to get into the debt market to fixed income products or through mutual funds by and large you need to be in financial assets could be insurance and millennials need to have the strategy right over there.
HK: Fabulous! We have got some really important points listed out by Dipan today and I am going to take you through it quickly in our “Wisdom in the bank” segment. The five critical trends to watch out for in the 2019 stock market outlook are…Trend 1: Political Uncertainty.
Trend2: Interest rates in stock markets and change of guard at the RBI.
Trend3: Global uncertainty.
Trend4: Millennials and how they manage their money.
Trend 5: And faith in the India story.
Dipan, thanks a ton for all the valuable information and insights today. We understand that the stock market Bull Run is dependent on a lot of internal and external factors and you have really helped us understand that.
DM: Thank you, it’s been my pleasure.
HK: Ok, with a lot happening within the country in terms of the Budget and elections and a lot more in the international markets, all we need to do is be more aware and informed when it comes to the stock markets and investments. So let’s promise ourselves to be more vigilant, a lot more informed and slightly more flexible with our investments to make sure we get the right returns even if the markets get unpredictable and choppy.
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