GoalTeller

October 06, 2024

Will India’s momentum continue or revert to the mean?

Looking at the last five years, it’s clear that Indian markets have been outperforming globally. But will this trend continue, or are we headed for a reversion to the mean?

Here’s a quick look at 5-Year Returns:

India: A leader with impressive gains, but is the rally sustainable?
China: Up over 20% in just the past five days, showing a sharp recovery.
Japan, US, and Nasdaq: Steady but not spectacular—could these markets regain their momentum?

While India has been galloping ahead, investors should ask themselves: Will this pace hold, or is a market cool-down inevitable? A diversified portfolio remains key, with an eye on global economic trends.

Indian Markets: Down approximately 4% from their peak.
Chinese Markets: Up more than 20% in the last five days (we had hinted at China’s recovery in our previous newsletter). We continue to believe that unless China faces a major economic collapse, there’s potential for a significant reversion to the mean over the next few years—though it will likely come with high volatility.
Election Results: As expected, they’ve been disappointing for the central government, adding to the uncertainty.
Nifty: Currently trading at a crucial 25,000 level. A dip below could open the doors for another 4-5% correction.

For investors with low equity exposure, this might be a good time to start deploying funds incrementally. However, given the number of triggers that could impact the market, we recommend a more gradual approach over the next three months to avoid missing out while managing risk.

Rise of personal loans

Despite stringent regulations from the RBI, personal loans continue to rise, signaling increased consumer spending. But this trend raises concerns.

What’s driving these loans?

Discretionary Purchases: More consumers are borrowing for non-essential items.
Stock Market Investing: Some are even using personal loans for market speculation—a risky move.

A market correction of 10-15% (which, by the way, isn’t even considered major) could trigger a cascade of negative impacts, both on the markets and the economy. That’s why we advise investors to think long-term and avoid taking unnecessary risks.

Here are three simple rules to follow:

Don’t borrow to invest.
Don’t invest in equities for short-term goals (less than 3 years).
Stop checking your portfolio daily—focus on the big picture.

For a detailed analysis on the rise of personal loans, check out the full report here.

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With markets likely to see more corrections, the HDFC BSE 500 Index Fund is an excellent choice for investors looking for broad market exposure. This fund covers a wide range of sectors, making it a great option for staggered investments.

Key Takeaways:

Diversifies your portfolio across multiple sectors.
Ideal for investors wanting to capture market dips.
Stagger your investments to manage market volatility.

As always, please consult with your financial advisor before making any investment decisions. Learn more here.

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Here are some articles worth your time this week:
- Nifty, Crashes, and Technical Analysis by Nooresh Merani: A fantastic read on market trends. Read here.
- India’s Middle-Income Trap: Insight into India’s economic challenges. Read here.
- Brand Lessons from Nike’s Troubles: Learn from the struggles of a global brand giant. Read here.
- How to Play India for the Long Term: A guide to positioning yourself for long-term gains. Read here.
- SC Upholds Notices to 90,000 Taxpayers: What this means for you as an investor. Read here.
- Record Rally in Chinese Stocks: A deep dive into China’s recent market performance. Read here.

"10,000% returns in a week 😉" – Sounds too good to be true, right? Vivek Banka humorously highlights the dangers of misleading investment headlines in his latest LinkedIn post. Check it out here.