MARKETS AT THE BEGINNING OF A BULL RUN

By Ruma Dubey

The markets are soaring.  Every day, any trigger would do; in fact every trigger is a positive trigger. When moods are optimistic, everything looks good. And that’s the scene in India. The BSE Sensex today crossed Rs.29,200 mark and 30,000 target is a given. We now hear fund houses and analysts mouthing even 33,000 and 35,000 before the end of 2015.

This seems incredulous. This galloping of the bourses is great news but when me and you want to get in, buy some quality stock, valuations are steep. There is nothing cheap currently available in the market. And if its cheap – be assured that the company would have issues, maybe corporate governance, debt, falling profits, poor management. So anything which is good , costs more and if its very good, its very expensive.  But at the same time, valuations are not yet as expensive as they were in 2008; so there is more to go.

That brings to mind a relevant question at this – when markets are scaling such new highs every day and stocks are up at new levels, does it make sense to get in now? Will this leave any profit on the table or should we happy with small, 2-5% gains only? And yes, there is always this palpable fear at the back of your mind – will this bull run last or am I catching it at the fag end?

Well, first thing first. This bull run, as per most analysts has just begun. What we are seeing is the momentum revving up for a speedy run ahead. The surge will not be every day; in fact it should not be. So we will have rises interspersed with falls and every fall is a good opportunity to get in, it is like a door left open before the next dance begins, get in and groove!

This optimism stems from a lot of facts. Firstly, India is projected to grow, with the World Bank also saying that we look better poised than China for a rise. Growth is yet to pick up and reforms are yet to be put in place but hopes are huge. The coming Budget has huge expectations riding on it and it will be a tough task for the Finance Minister to give away sops while filling in his coffers. 

Three things going in favour for the country – lower inflation, lower crude price and more importantly, interest rate cycle turning downwards. When rates start climbing down, demand is expected to perk up. The realty sector which is on the brink of collapse, with many predicting a major fall in prices might just have been saved from falling over the precipice with the rate cuts signals.

Yesterday’s bond buying program of ECB is also a very good thing for India. Money will find its way into the emerging markets and currently India seems to exude a very positive, come-hither picture. This stimulus for Europe is also very good for many of our Indian companies for whom Europe is an important market.

There is no doubt that money will come into India. This is reiterated further by Morgan Stanley’s theory – TINA or There Is No Alternative. It expects money to come to India because the other options do not seem attractive enough. It states that India offers good opportunities in terms of diversification and stock picking because it believes its corporate fundamentals seem more “stable”.

Well, whether it is TINA or QE3, these reports indicate that things could turn for the better in India. And in these times, like the drowning man clutching to the last straw, any theory, as long as it reiterates optimism, is worth pursuing.

Signs of a bull market coming to an end – unaffordable valuations, booming IPO market and when the nukkad paanwallah starts recommending stocks. We are nowhere there. Yes, get ready for a multi year bull run!