The past few weeks have been harrowing for novice investors. Stock prices are tumbling like there is no tomorrow and there is talk that the situation will worsen because a 2008-like crises is around the corner. Fortunately, the Gurus are leaving no stone unturned to ensure that novice investors don’t do anything drastic like selling off all their shares.
Madhusudan Kela, Chief Investment Strategist with Reliance Capital, is highly regarded for his clarity of thinking and ability to put issues in their proper perspective.
In his latest interview, Madhusudan Kela straightaway got down to the task of soothing our nerves by confidently asserting that the “Bull market is 100 per cent intact”.
Kela also pointed out that the present correction is not an unexpected event given that there was a build up of huge euphoria and frenzy over the past couple of years. He also explained that the savage fall in crude oil prices had sucked up liquidity amongst the oil producing nations and their sovereign funds had been deprived of funds of nearly $1 trillion which would have otherwise come into the stock markets.
Kela also explained that while the fall in crude oil prices is a long-term positive factor for the consumer countries (such as India), there is no one-to-one co-relation and such imbalances happen in the short-term.
He emphasized that India is one of the biggest beneficiaries of the fall in crude oil prices because a fall of one dollar in the price of crude results in savings of $1 billion for India. So, the steep fall in crude oil prices from $86 to $50 will result in enormous gains for the Indian economy, Kela added.
After a lot more number crunching, Madhusudan Kela advised us “not to be afraid”. He emphasized that the present crises situation is a “fantastic opportunity” for us to buy top-quality stocks though he advised us to buy in a systematic manner and over a period of time because the risk of a further correction cannot be ruled out.
In terms of specific sectors, Madhusudan Kela is gung ho about the banking sector. He explained that bank stocks have taken it on the chin and are down 20% to 30%. However, as banks are the biggest proxy for any economic recovery, they would be the first ones to recover lost ground. He also opined that while banks are prone to problems of NPAs, the fears are “significantly exaggerated”. Even if 25-30 per cent of the book value is shaved off on the ground of NPAs, some banks are still “very compelling opportunities” Kela said.
Kela also offered important advice that we need to change our mindset with regard to equity investing. He pointed out that when we invest in land or gold, we do not have the urge to keep checking whether the prices have moved and are content to stay invested for several years. However, in the case of stocks, we have the irresistible urge to obsess over the stock prices and get worried unnecessarily over the volatility even though the fundamentals of the underlying companies remain unchanged. Kela advised us to invest in stocks with a long-term perspective and promised that if we do so, we could also bask in great riches!