scorecardresearchGo long on India: Why should you be bullish on the Indian growth story?

Go long on India: Why should you be bullish on the Indian growth story?

Updated: 26 Mar 2023, 12:40 PM IST
TL;DR.

Investing in the stock market for the long term and focusing on your career is the best way to create wealth and achieve financial goals.

The stock market, also known as the share market, facilitates the exchange of shares between buyers and sellers.

The stock market, also known as the share market, facilitates the exchange of shares between buyers and sellers.

It's not India's decade, it's India's century, says McKinsey's Bob Sternfels.

According to McKinsey & Co. CEO Bob Sternfels, India will not only experience its decade but also its century, potentially achieving something significant not just for the Indian economy but for the entire world. They include a sizable working population, global supply lines being reimagined by multinational firms, and a nation catapulting at the digital scale.

India is on track to become the world's third largest economy

In addition to what Mr. Bob said, we can observe that capital spending is rising in all sectors of the economy, corporate earnings in India are at an all-time high, and there is a healthy level of confidence. We have seen how a small number of unicorns that were not even ten a few years ago are now more than 100, providing plenty of job opportunities and overall economic growth.

Throughout the next five to six years, India's economy, which is currently the fifth-largest in the world, is anticipated to move up to third position. India's GDP is anticipated to reach $10 trillion within the next nine to ten years.

This is far bigger than just investing in the stock market

India's time has come, and I don't just mean that you should invest in equity alone; this is much bigger than that, let me explain.

What is the most important financial asset class?

I keep asking people what the most valuable financial asset or instrument is, and I rarely get the correct answer. The correct answer is not the stock market or real estate, but you, yes you. Because there is no limit to the amount of money you can create, I can create, and that is why people don't do their financial planning correctly, they forget that focusing on your career, business, or job can yield 10x, 100x or even more as there is no limit to the amount of money you can make.

Our country will provide ample opportunities for us to grow in our careers, whether it is a job or a business, so that we can not only earn a living but also thrive, and only we can limit our growth. Then comes the part about investing your hard-earned money in the right financial investments. So, don't miss this.

Go long; true definition of long-term investing does not mean invest and forget

When I say "go long," I mean investing for at least the next ten years, if not more. Long-term planning does not necessarily suggest that you will simply forget. Fill it, shut it, and forget it doesn't apply in today's world; instead, one must be adaptable and regularly check their portfolio in this dynamic environment.

Now, regular also depends on the size and composition of your portfolio and can range from a quarterly to a yearly review and can help you make a timely decision in terms of switching your mutual fund schemes to better ones and the stocks as well.

The underlying assumption being that the story and premise you had invested in that scheme or stock no longer holds true and you also have a better opportunity, don't just change any scheme or stock for a short-term non-performance. Let me explain more;

The long term is nothing more than a sequence of short-term goals

It is crucial that you assess your portfolio and take timely corrective action as contrary to what many people believe or what investment gurus have been saying for years, investing for the long term and forgetting it would have worked in the past.

If, for instance, you invest in TCS or ICICI Bank, then regular review means that every time you check your portfolio and see these names, you will research, analyse, and ask yourself or your advisor whether the future of these stocks is still good and in line with your plan.

If the answer is yes, then continue and repeat the same exercise.  Now, if the answer to your question about whether to continue holding these two stocks is "yes" when you conduct regular reviews of your equity portfolio, you should continue holding them.

If this is the case, you will continue to hold them and this series of reviews that you conduct in every one, two or three years will make you hold them for ten or even more years and become a true long-term investor.

This is opposed to someone who simply invests and then forgets, and this is what a true long-term investor is. Because you never know when your unique great stock that can transform your fortune will turn bad and become the kind of YES bank, JET airways, Suzlon, and so many more like this, be careful and learn the actual meaning of long term investment. That is why you cannot afford to invest and forget.

Forget the performance of the stock market during the past three years

The pandemic spooked the markets and drove them to fall by 30–40% in less than a month in March 2020, we witnessed the stock market experiencing a roller coaster ride where the Sensex had dropped to below 26,000 points before rising a few months later to above 61,000 points.

In December, the Sensex touched all-time highs. The market then entered a correction phase once more and investors who have only recently entered (last year or two) the stock market are unlikely to have seen any returns on their investments; direct stock investing has resulted in losses for many, and mutual funds have been relatively flat in the last two years, with the exception of a few outliers.

Those investors are a little disheartened, but let me tell you, remind yourself that you are in the accumulation phase and don't worry about the last two years, especially in these times, but rather focus on long term wealth creation, which I assume is what you are here for, to achieve your financial goals.

Investing in the stock market for less than five to seven years is not recommended in any case. Because of recent SVB and Credit Suisse banking crises and global inflation, the stock market has corrected even more. Because of this, investors should exercise caution and not rush into the equity market. Instead, they should stagger their investments and use STP for mutual funds.

So, stay invested, concentrate on your career, make money, invest, and go long on India.

Rishabh Parakh is a Chartered Accountant and a founder of NRP Capitals.

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First Published: 26 Mar 2023, 12:40 PM IST