Some crystal ball gazing for 2020

Given the lackadaisical performance of our markets in 2019, a lot of people who are connected with it directly or indirectly are hoping for 2020 to be a much better year. Let me try and do some crystal ball gazing to speculate how the year might pan out. 

To begin with, it is important to understand that the global situation is really facing a lot of headwinds in economic terms and the cutrrent events unfolding are unlikely to change this any time soon. A lot of the global growth depends on countries such as US, China, Japan etc and the current context in this is not reassuring at all. In US, the impending impeachment of Trump is likely to cause a lot of friction and instability, the US-China trade talks are at best a patchwork, demand situation in any of these countries is also a cause for worry. The US stock markets however, are doing quite well compared to many others and this has caused money to flow into them. This really is a double whammy – countries such as India suffer from the negative situation in the US in terms of sentiment and also get impacted adversely as there is less FII money available. On top of these issues such as buying oil from Iran, the situation in Kashmir has caused a certain amount of cooling off between India and US which affects exports considerably.

For India though, the domestic situation is a far greater concern as compared to the international one. The implicit assumption last year was that a victory of the BJP led NDA will act as a tonic for the beleaguered markets and things would go well from there on. In practice the aggressive posturing by the BJP on a variety of issues, their inability to form the government in Maharashtra, loss in Jharkhand, continuing slide of the economy in terms of the IIP and GDP numbers have managed to create an uncertain situation and as we all know the markets do not like uncertainty. BJP presented 2 budgets in 2019 and both lacked direction and were completely unimaginative as far as growth was concerned. Yes, the current Finance minister did try and correct this by taking some measures when the market slide was unabated, and this has helped in recovery of the headline indices. In my opinion though this was too little and definitely too late.

Some of you may ask as to whether I am being unduly negative when the markets are at their life time highs. The point is the NIFTY and Sensex numbers are due to money being pumped into a few companies. The broader markets have remained pretty much where they were earlier and stocks like Yes Bank been beaten down so badly on price is an indication of lack of investor confidence. I see two real issues connected to each other in a very direct way. Firstly consumer confidence is at the lowest for a long time now and secondly this has resulted in consumption not picking up. A direct result is the earning growth of companies is muted and companies are reluctant to invest, even when they now have some unexpected extra money due to the cortprate tax cuts. Finally for all those who are saying that our indices should cause a cheer or two, look at the following data point. In 12 years from 2008 to 2020 January, NIFTY has gone from 6000 to 12000 levels. That is an annual return of 6 % and your money in a bank FD would have earned as much, definitely a lot more in instruments such as PPF.

All right, enough of the doom and gloom then, let us look forward. In terms of politics, though the BJP is well entrenched in the centre, they are losing the states and an united opposition poses a significant challenge in these elections. This may well cause the BJP to adopt more populist measures at the cost of fiscal prudence and this will have long term negative effects for the economy. In the short run though measures such as income tax cuts, reversal or reduction of LTCG taxes, lowered petrol prices will definitely help boost consumer confidence and hopefully also help in kickstarting the consumption demand. I see this happening in the second quarter of 2020 and the markets may well anticipate this and start rising in the early part of 2020 post the budget. If the cycle of events play out as expected and corporate earning growth is a reality finally, the market growth will also be sustained. I think this is possible if things are handled well from here on.

So finally for the predictions then – I think Nifty will be in the range of 12000 to 12500 till the budget and may well scale 13000 by June or so. From then the paths can be both choppy and uncertain – there is a possibility of reaching 14000 by December if all goes well but a more likely figure will be 13600 or so. However, if things go wrong it is quite easy to see Nifty back in the sub 13000 range, may be even lower than 12500. I think the first scenario will hold and am hoping for it too 🙂

What will be the impact on the investments and what should be the choices in 2020? Let me try and do a post on this tomorrow.

Society, Economy, Politics -how will markets react now ?

India of 2018 is a very interesting case study of contradictions in many ways. We have a government that was taken to be long term, at least till 2024, but with the election results this week it is clearly under siege. We have an opposition buoyed and flush with the recent electoral success but pulling in too many directions that may militate against it mounting an effective challenge. We are the fastest growing large economy in the world but our GDP growth rate is again under pressure. With so many things happening in the society, economy and politics, how are our markets likely to react?

Let us take society first – it is easy to see that we live in deeply divided times. The fault lines between different parts of our society is very clear. In terms of religion, the division is wide among Hindus and Muslims with both feeling they are hard done by. The non decision by the courts on the Ram temple issue has clearly caused a deeper divide and is like a festering wound that is now taking a heavy toll on communal harmony. The cow slaughter issue is central to a lot of disharmony and is not being handled properly by the governments. People today lack faith in law and order and are increasing taking the law into their own hands as evidenced by the spate of lynchings across the country, the latest being the sad death of a policeman. Religion is only one side of the coin though, caste is the other. Even today the dalits are treated atrociously in India and that is a great shame. As they get better educated and relatively improve their economic state, they are becoming more assertive, obviously to the chagrin of the upper castes. In general the society is also high on aspiration, education and jobs being the prime drivers. Sadly there is a clear disconnect between them and a lot of educated youth are not finding any avenues to use that education. Changes must be brought through an entrepreneurial revolution but even with government financing the success here is mixed as yet. This is leading to increased demand of more and more reservations, which obviously is not a solution. The societal disparities are also staggering and while the overall per-capita income and living standards rise have reduced poverty, the difference in how the various classes of society lives is mind boggling. All of these create a society in constant tension, reflected by so many unsavory incidents we get to hear of almost daily.

Coming to the economy, agrarian distress is definitely a cause for great concern. A lot of people even today depend on agriculture in our country and the reality is it is virtually impossible to make a living out of it, unless things are changed drastically. Elimination of middlemen and focusing on streamlining of the supply chain is the need of the hour but the vested interests are way too strong for it to get done easily. The focus therefore wrongly shifts to loan waivers which is akin to applying balm when you really need surgery. GST has been a much needed tax reform but the implications of it are that people need to pay taxes honestly after declaring their incomes – again something that most Indians are wont to do. It has to be accepted now that demonetization had a lot of short term pain for the economy and people, it unfortunately was also not followed up properly to get the tax windfall that was quite possible to achieve. Our GDP growth could easily have hit 8 % but for this step and the country is paying a heavy price for it. The tax system has really had no reforms other than the GST and compliance, though improved, have not really led to any game changing tax collection buoyancy. Finally, corporate earnings are still languishing and do not enthuse the markets. So if you had to evaluate the overall economy over the last 4 years, you will probably see a lot of long term initiatives but no great short term performance.

What of politics then? Well, about a year back BJP pretty much ruled most of India and it was a foregone conclusion that they will come back to power in 2019. However, the scene has changed rather dramatically in the last few months culminating in the Congress win of 3 states. BJP or NDA might still come back to power but it will be a tough battle and one they may well lose too. In democracy that is not an issue but the two opposing sides are so bitterly opposed to each other that any change of government will create a fair bit of upheaval throughout the country. Turbulent times ahead as the opposition will seek to hammer home the advantage they have got and BJP will try to take initiatives to win back the goodwill of people.

How will the markets take in all this? To begin with the markets have taken the BJP losses rather well as they were probably factored in. Over the last year the indices have not really gone anywhere, the mid caps and the small caps having taken the biggest hits. FII participation has been lukewarm at best and looks to continue in the same vein with other markets looking more attractive than India. SIP money coming in regularly into the markets courtesy retail participation has been a saving grace for the markets this year and this may well continue. As I see it the markets will take a pause for now and Nifty will be range bound between 10400 and 10800, maybe touching 11000 on the upper end. By the time we get into the budget exercise the markets will react one way or the other. BJP will be forced to take populist measures and this may cause markets to react negatively. My sense is that Nifty can get down to 9500 or so at the lower end and is unlikely to cross 11000 at the upper end. This will hold true till May, unless the budget is significantly positive for corporate India. The other aspect is of course the annual results and earning growth which is unlikely to be very enthusing. Beyond the May 2019 elections, markets will rise as long as there is a stable government.

So what should you do about your investments then? I will write about it in the next post.

 

My 3 portfolio strategy works best in a market crash

I am sure most investors are shell shocked by the turn of events over the last 2 months. For me, even with my decades of market experience and that of 2008 downturn and so on, the fall has been pretty brutal to say the least. My combined equity portfolio in stocks and MF got whacked down by more than 20 % in a few day, not to speak of the cuts of the previous months that it had witnessed. The point brought home rather forcefully is this – it is one thing to understand the nature of equity returns, quite another to experience it in real life.

However, the good part in all this is that the crash was not the first of it’s kind and in all previous instances the markets had stabilized in the medium term. This time, the global factors and the domestic situation in India are both against a quick pull back in the markets. I can foresee a lot more pain in the markets over the next few days and the earliest signs of some turnaround for us may well be linked with the election outcomes and quarterly results of Q3. As far as your investments go, it will be a good idea to deal with them as outlined in my other posts.

As I have said before, such times of tribulation are a good instance for checking out whether your overall investment and asset allocation strategies are designed to weather the storm. If you are following the 3 portfolio strategy of debt, MF and stock portfolios then here is how you are affected and also some pointers as to how you need to deal with the context:-

  • Your stock and MF portfolio will undergo serious cuts, more so than what you have witnessed so far. It is quite possible that by the time the pain is through these can reduce in value by 30-35 %.
  • More importantly, you will suddenly see your SIP amounts of the last 2 years or so starting to show much less returns, some of these will be in the negative territory.
  • As a lot of the portfolio value of MF was really dependent on 2014 rise in the markets, the current crash will have a severe effect on overall XIRR. It will definitely fall to single digits if this continues.
  • Continue your SIP and add more MF units manually from time to time. You will find it difficult to predict market bottom, but considering the long term growth potential, every 5 % cut is a good investment opportunity.
  • For your stock portfolio make selective purchases in stocks you want to have in your portfolio. As always, do not put a big sum of money at one go, use price triggers and ensure your unit costs are coming down.
  • If you are not comfortable to buy into equity now, park your surplus money in Liquid funds for later use.
  • For those who are working and have an active income, some specific pointers are as follows:-
    • Continue investments as before, stopping SIP will really be a bad idea at this time.
    • Build up your cash reserve if you believe there will be better buying opportunities round the corner.
    • Your equity portfolio is for your long term goals – in that case do not worry at all.
    • If any of your goals were coming up shortly and your plan was to redeem part of equity portfolio then you need to change your plan. This is the wrong time to sell equity, look at getting the needed money from debt.
  • For people in the FI state like me, some of the specific pointers will be as below:-
    • Check how much of your passive income stream was dependent on equity. For example, in my case the income from dividends in stocks and MF amounted to about 30 % of my annual needs.
    • Understand that contribution from equity towards passive income will reduce in this and possibly next year. You need to have alternate sources now.
    • One way can be to look at generating some active income through what you do. In my case, I will be putting more efforts into getting Consulting assignments now and over the next 1 year.
    • If you had a goal which was depending on equity redemption, you may need to check the feasibility of postponing the goal. Your debt portfolio will need to generate passive income and it may not be a good idea to leverage it for your current goals, unless absolutely essential.
  • For people in retirement, most of the above will apply, except for generation of active income part.

People not familiar with the 3 portfolio strategy can read about it here. If you are interested in building up these 3 portfolios for your own investments read this post. The fundamental concept is that your equity portfolios have been grievously injured now and may well sustain further damage in the near future. The only real way to help it recover is to give it time. In time, markets will recover at least in India we can be reasonably assured of future growth. How much time it will take, none of us can really foretell.

Till then you need to be conservative with where you put your money and also a little ambitious in seeing if putting some money into equity makes sense.

Interested readers may pls follow my blog on email by clicking on the relevant button on the right hand panel. I will shortly be stopping the practice of posting the links in different Facebook groups. Following the blog will ensure you get intimated whenever there is a new post.

The levels of Indices tell a story now

I have been away from the blog for a week now owing to a travel to Mauritius. It was nice to see that the blog had good readership even in the absence of any posts from my side and that I got several requests to post something on current market situation.

Of course, while I have been away from writing posts in the blog, I have not been away from the markets. In the present state of financial independence, the markets are quite important to me and, despite my significant experience with them, it will really not be very true to say that the volatility has not really caused any anxieties in me. Of late the indices have plummeted again after a good recovery where both Nifty and Sensex had reached their life time highs. Does this mean the recovery is over and we are back in a bear market? The short answer to this question is No. For the long answer, let us look at the levels of indices.

I will look at Nifty 50, Nifty Midcap 100 and Nifty Smallcap 100 as these will give us a very good view of the overall market. Thanks to SEBI, the definitions are now quite clear and investors can invest in both stocks and MF with a lot more clarity than before. 

What is Nifty telling us based on current levels and DMA?

  • Closing value today is 10967, about  800 points shy of lifetime high. Note that the lifetime high was achieved in the previous month itself.
  • YTD returns as well as returns for all periods up to 3 years are positive, except the 1 month period. The range is 9.7 % for 6 months and 39 % for 3 years. For 1 month it is -3.7 %.
  • Current level of Nifty is well below 30, 50 DMA and just more than 150 and 200 DMA.
  • Based on this I predict that Nifty still has some downside left and can well go to earlier territory of 10500 or so in the near run.
  • However, it is likely to get support thereafter and be range bound between 10500 and 10800.
  • Unless some out of the way good news is there on the political or economic front, I do not see it going above 11000.
  • If BJP loses the upcoming state elections then a drop to 9500 or so cannot be ruled out.

What is Nifty Midcap 100 telling us based on current levels and DMA?

  • Closing value today is 17847, just above 52 week low of 17430, and well below the lifetime high of 21840.
  • YTD returns and returns for other periods in this year are negative. 1 year return is also negative at -3.1 % while 3 year returns are nearly 43 %.
  • Current level of Nifty Midcap 100 is significantly lower  than 30, 50 and 150 and 200 DMA. 
  • Based on this I predict that Nifty Midcap 100 still has some downside left and can well go to 17500 or so in the next 1 month.
  • However, it is likely to find support thereafter and be range bound between 17500 and 18500.
  • Unless some out of the way good news is there on the political or economic front, I do not see it going above 19000.
  • If BJP loses the upcoming state elections then a drop to 17000 or so cannot be ruled out as it will very likely breach the 52 week low levels.

What is Nifty Smallcap 100 telling us based on current levels and DMA?

  • Closing value today is 6722, just above 52 week low of 6644, but well below the lifetime high of 9656.
  • YTD returns and returns for other periods in this year are negative. 1 year return is – 13.3 % while 3 year returns are nearly 33 %.
  • Current level of Nifty Smallcap 100 is significantly lower  than 30, 50 ,150 and 200 DMA. 
  • Based on this I predict that Nifty Smallcap 100 still has some downside left and can well go to 6300 or so in the next 1 month.
  • However, it is likely to rebound thereafter and be range bound between 6800 and 7500.
  • Unless some out of the way good news is there on the political or economic front, I do not see it going above 8000.
  • If BJP loses the upcoming state elections then a drop to 6000 or so cannot be ruled out as it will very likely breach the 52 week low levels.

So what does all this mean for your investments and how should you tackle your existing MF portfolio? Well, this post is already quite long, let me address that in the next post.

What are the indices telling us now?

I have been away from the blog for a long time now due to several other things happening in my life at present. The current leave of absence has been more than a month and is clearly the longest since I started the blog in June 2015. It was nice to see that the blog had good readership even in the absence of any posts from my side and that I got several requests to post something on current market situation.

Of course, while I have been away from writing posts in the blog, I have not been away from the markets. In the present state of financial independence, the markets are quite important to me and, despite my significant experience with them, it will really not be very true to say that the volatility has not really caused any anxieties in me. Of late the indices have recovered and both Nifty and Sensex are at life time highs right now. Does this mean the worst is over and we are back in a bull market? The short answer to this question is No. For the long answer, let us look at the levels of indices.

I will look at Nifty 50, Nifty Midcap 100 and Nifty Smallcap 100 as these will give us a very good view of the overall market. Thanks to SEBI, the definitions are now quite clear and investors can invest in both stocks and MF with a lot more clarity than before. 

What is Nifty telling us based on current levels and DMA?

  • Closing value today is 11435, just 60 points shy of lifetime high. Note that the lifetime high was achieved in the previous week itself.
  • YTD returns as well as returns for all periods up to 3 years are positive. The range is 8 % for 6 months and 35 % for 3 years.
  • Current level of Nifty is more than 30, 50, 150 and 200 DMA.
  • Based on this I predict that Nifty still has some steam left and can well go to uncharted territory of 11600 or so in the near run.
  • However, it is likely to run out of steam thereafter and be range bound between 11200 and 11500.
  • Unless some out of the way bad news is there on the political or economic front, I do not see it going below 11000.
  • If BJP loses the upcoming state elections then a drop to 9500 or so cannot be ruled out.

What is Nifty Midcap 100 telling us based on current levels and DMA?

  • Closing value today is 19255, well above 52 week low of 17528, but well below the lifetime high of 21840.
  • YTD returns and returns for other periods in this year are negative. 1 year return is only 6.5 % while 3 year returns are nearly 40 %.
  • Current level of Nifty Midcap 100 is higher than 30, 50 and 150 DMA and about 300 points lower than 200 DMA. 
  • Based on this I predict that Nifty Midcap 100 still has some steam left and can well go to 20500 or so in the next 3 months.
  • However, it is likely to run out of steam thereafter and be range bound between 20000 and 20500.
  • Unless some out of the way bad news is there on the political or economic front, I do not see it going below 19000.
  • If BJP loses the upcoming state elections then a drop to 17500 or so cannot be ruled out as it will very likely test the 52 week low levels.

What is Nifty Smallcap 100 telling us based on current levels and DMA?

  • Closing value today is 7493, well above 52 week low of 6923, but well below the lifetime high of 9656.
  • YTD returns and returns for other periods in this year are negative. 1 year return is only 1.3 % while 3 year returns are nearly 35 %.
  • Current level of Nifty Smallcap 100 is higher than 30 and 50 DMA but significantly  lower than 150 and 200 DMA. 
  • Based on this I predict that Nifty Smallcap 100 still has some steam left and can well go to 8500 or so in the next 3 months.
  • However, it is likely to run out of steam thereafter and be range bound between 8200 and 8500.
  • Unless some out of the way bad news is there on the political or economic front, I do not see it going below 7200.
  • If BJP loses the upcoming state elections then a drop to 6800 or so cannot be ruled out as it will very likely test the 52 week low levels.

So what does all this mean for your investments and how should you tackle your existing MF portfolio? Well, this post is already quite long, let me address that in the next post.

Some crystal ball gazing for the next year

If you are an Indian then you are probably seized of the importance that the next 12 months, or even 11, have in store for the country. It is not easy to predict the outcomes in different aspects of life as much of these issues are quite complex in nature. However, it will be safe to say that whatever the outcomes, they are likely to change things for the country in a significant manner. In this post, I will try to do some crystal ball gazing into 4 important areas, namely Society, Politics, Economy and Markets.

Let us look at society first and, I think most of us will agree that we live in very divisive times today. Whether it is division along class lines or on community lines, there is a lot of basic mistrust that people have for each other today. This is manifested in the bitter invective political parties come up with, in communal skirmishes in several parts of India, lynchings on suspicion of kidnapping children and so on. The law and order machinery has pretty much broken down with rapes, assault and mob lynchings being a daily occurrence, as opposed to the exception they used to be earlier. The society is also divided along class lines – industrialists perpetrating big financial frauds on the banks seem to get away, while indigent farmers have to commit suicide as they are not able to pay small loans back to the banks. Nothing seems to be sacred any more – army men are pelted with stones, anti national slogans are shouted in the name of freedom and people cynically debate as to whether one needs to stand up to the national anthem.

Unfortunately, over the next 11 months or so I think the society is going to get more polarised along communal, caste and class lines. With the BJP in power, the right wing fringe groups have got emboldened and violence has become a way of life for both these people and the ones they oppose. For the political parties a divisive agenda is the only way to bring out a good electoral outcome and they will not do anything else. The court judgement on the Ram Mandir issue will add to the polarised atmosphere of the country and the movement towards an Uniform Civil Code will heighten communal tensions. The only way is to tighten law and order by being tough to all perpetrators of crime, without fear or favour. However, in an election year that will never really happen.

Politics is, of course, at the core of everything that is happening in our society today. For both BJP and the opposition the 2019 elections will be a game changing one. When BJP lost unexpectedly in 2004, it took them 10 years to come back in power, even though the UPA ran a shoddy and corrupt government. The opposition knows they have been lucky not to have their misdeeds exposed and judged in the current term of the government, but their luck will not hold if BJP gets another term. With this backdrop both sides will do everything possible, both fair and foul, to win at all costs. The by poll results have shown that if the opposition comes together, it is tough for the BJP to win in today’s scenario. However, a lot of this can change in the next 11 months, BJP will hope it does.

My assessment is that the opposition will never agree to the simultaneous election idea that BJP is so keen on. Congress knows that it has chances in MP and Chattishgarh, with Rajasthan almost certainly going to them. It therefore makes sense for them to show BJP on a losing wicket when it goes for the Lok sabha elections. The only way BJP has out of this is to hold elections in January or so and get these 3 states as well as Andhra Pradesh and Telangana clubbed. This has a definite element of risk as Bajpayee had found out in 2004 and many in the BJP will remember that lesson. In any case, BJP will probably have to bite the proverbial bullet as the alternative is certainly worse. Whichever way it decides to go, I cannot see it getting anything more than 250 and anything less than 200 seats. If it is the former then there will be enough parties who will tag along for them to form a government. However, anything less than 230 will really mean a Karnataka like situation where everyone will come together to keep the BJP from power. I think 250 is a possibility but for that to happen large sections of the society will need to support the BJP as they did in 2014 – the health program, MSP pricing, Kashmir having President’s rule, possible solution to Ram Mandir are all geared towards this.

What of the economy then? It is now clear that the corporate results are on the way up, though in a slow trajectory. The tax collections are fairly robust and the initial glitches with GST are improving now. Good measures like the bankruptcy code and declaring absconders as fugitives will make sure that people do not take banks for a ride. However, the expenses of the exchequer have increased manifold due to the Universal health scheme as well as the MSP increases. This, along with the refusal to reduce taxes on Petrol/ Diesel will unfortunately create an inflationary impact in the economy. The RBI may well be forced to increase the interest rates and coupled with the depreciating Rupee against the US Dollar, there is a good chance that the economic recovery might get stymied. The government is hoping that the effects of this will be only visible after the elections but people who know will be able to see this portent quite clearly.

Finally, how will the markets fare in all of these. Right now, I see the Nifty being in a range of 10000 to 10800, with a possible negative bias. If elections are held separately and BJP loses the assemblies then a fall to 9000 and below is quite feasible. In the event of BJP losing in the Lok Sabha and being unable to form the government, a 20-25 % downside from the 10000 figure is reasonable to expect. On the other hand the relief will be palpable if BJP somehow comes back to power and a rally to 11000 plus, maybe nearing 12000 can be expected.

So there you have it – a swing of 8000 to 12000 is possible. This is the kind of excitement that many expert investors seek in the markets in order to make money. For most of us though, such volatility is really not desirable. How should they deal with their investments in this turbulent period?

I will write about investor strategies in the next few posts.

Are we still in a Bull market?

In several discussions about our stock markets, the inevitable question that comes up is – Are we still in a Bull market? At times the people asking the question are really not aware of what a Bull or a Bear market is, they are merely articulating what they have read somewhere or heard on the TV channels. In this post let me try and define these a little, in the context of our markets over the last 15 years or so.

So let us start with the basics – the long term returns for Nifty has been in the range of 14% over the last 3 decades or so. You can define a Bull market as a period of time where the returns were significantly higher than this. In the 2003-2007 period the returns were in excess of 30% as Nifty went from about 2000 to 6000 odd levels. This period can therefore be definitely classified as a Bull market. The corporate profits grew 4 times in this period and the PE ratios approached the high 20’s by the time the run ended.

Contrast this to the period 2008 to 2015. The annualized return on the Nifty was well below the 14% mark. Though the markets went up and down the overall trend was negative. Volumes were generally muted and the overall sentiment was a negative one. This was very clearly a Bear phase of the market. This phase ended in 2015 December and since 2016 beginning we are in a Bull phase again.

It is important to note that in a Bull market there is often a possibility of fairly deep corrections, often more than 10% and at times even to the extent of 30%. In the last Bull run of 2003-2007 there were more than 10 such corrections. The recovery of the markets from such corrections ranged between 2 and 6 months. Even in the present Bull market which started in 2016 there have been 3 instances of such deep corrections. In each of these cases there was recovery in the markets and it went up more than it had fallen.

So, coming back to the main question of the post, are we still in a Bull market? There is a very interesting twist to this answer. For front line stocks ( say top 100 ) the profit multipliers have not been great yet and neither are the PE ratios at a very high level. So the indicators do not signify an end to the Bull market soon. From all available data it seems likely that the run will last till 2020 end or even more. Of course, unexpected events such as the incumbent government losing power can signal an abrupt end to it. In the meantime there will be deep cuts from time to time and investors should use it as an opportunity to buy more.

The broader markets with Mid cap and Small cap stocks are a different story though. Here the individual stocks have been battered down quite badly, in some cases being down by 40 to 60 % from their peak price. Though the recovery may yet happen, it is likely to be rather slow. In case it goes into a deep time correction without recovery then we will have to say that a Bear run has started for this part of the market. As Indian companies grow at different levels this may well become the norm where different part of the markets exhibit different buying levels and interest.

On the whole though, I am inclined to think that we are in a Bull run for the overall market – maybe more so for the large caps and less so for the others. Unless BJP loses 2019 polls, it is very likely that the run will continue till 2022 which will be the mid point of the next government.