The beginning of the year was marked by elevated inflation, geopolitical uncertainties and Foreign Portfolio Investor (FPI) outflows, creating a cautious market sentiment.
However, as the year unfolded, these initial pressures gradually eased, giving way to an improvement in investor confidence. The market has shown adaptability and resilience, weathering the storm of uncertainties.
The positive performance of the Nifty, even in the face of global economic dynamics and external pressures, showed the underlying strength of the Indian financial landscape. This resilience served as a testimony to the effectiveness of economic policies, regulatory measures, and the adaptability of market participants in navigating challenges and fostering stability.
While challenges such as fluctuating global interest rates, volatile oil prices and looming domestic elections persist, the Indian growth story continues to be compelling, offering investors significant potential for wealth creation over the long term.
Here’s a look at some lessons investors should learn from 2023.
Anshul Arzare, MD and CEO, Yes Securities
1. Financial literacy: Anshul Arzare, MD and CEO, Yes Securities, believes that staying up-to-date, mitigating risks, being persistent, planning and budgeting, are essential ingredients for financial success.
2. Caution against unforeseen occurrences: Arzare also advised that it is prudent to anticipate unpredictable events, such as the existing geopolitical tensions and the recovery challenges faced by developing nations after Covid.
3. Focus on quality: Arzare also warned that individual investors must be careful and avoid depending only on the momentum observed in the gray market when considering investments in IPOs. Instead, the focus should be on quality companies with strong moats and reasonable valuations to ensure sustainable returns. Finally, don’t try to time the markets – it’s a recipe for disaster. Market fluctuations are an inherent feature, so avoid impulsive responses and instead adopt disciplined, research-driven investment practices with appropriate asset allocation to navigate volatility and cash flows.
4. Focus on the long term: Arzare stated that it is important to understand that wealth creation is a slow process and requires disciplined and patient investing. Therefore, in order to reap profits, investors should have a long-term perspective when investing towards their financial goal.
Neeraj Chadawar, Head – Fundamental and Quantitative Research, Axis Securities
5. Invest systematically: No one can predict the timing of the market correction or the period of the bull phase. These bull and bear phases of the markets are driven by sentiment in the market. When the sentiment is positive, the market will continue to do well while the market will fall in a fearful scenario. Therefore, investing systematically in a market rather than investing in one cut is recommended, said Neeraj Chadawar of Axis Securities.
6. Importance of asset allocation: Asset allocation is an important step when managing personal finances. Volatility is an underlying risk associated with the individual asset class. 2023 has seen a very volatile time, with many ups and downs in asset prices amid uncertainty that has grown due to a hawkish FED, rising bond yields and increasing geopolitical tension. One can navigate through these volatile times smoothly with the right savings diversification into various asset classes with proper risk calibration. With the right allocation of assets, one can manage the portfolio in the case of uncertain times.
7. Clean the portfolio regularly: Each bull phase of the market will provide the opportunity to correct the mistakes of the last bear phase. In a bull market, prices rise for a period, led by optimism about the economic recovery. In this phase, the fear of loss is very low, which leads to momentum in low quality stocks. In bull phases, investors are often tempted to build up higher holdings in low-quality stocks and end up with higher exposure to them. Once the cycle turns, they incur huge losses due to the less weight given to the quality of the portfolio. So, making a high-quality portfolio with a profit reserve or a well-defined exit strategy in low-quality stocks is recommended once target returns are achieved.
Kavitha Subramanian, Co-Founder, Upstox
8. Conviction in stocks as an asset class: According to the BSE website, the Indian key benchmark index, BSE Sensex, is up over 16% YTD. These double-digit returns (which are ex-dividend) are despite the geopolitical tensions and the headwinds created by high inflation and rising interest rates. Further, the total return of NIFTY50 over the last decade has been in the range of 13-14%
9. PSU banks are not always a bad choice: The Nifty PSU Bank index is up 23% on a YTD basis, while the Nifty Private Bank index is up 9% over the same period. Rating issues and PSU banks as a basket were available at cheaper multiples at the beginning of the year. Always look at valuations and multiples (value) before investing.
10. Indian market no longer depends on FII: The year 2023 belonged to the retail investors in India and their dominance. The FII participation is at a 10-year low, and the Indian benchmark indices are at an all-time high even as the retail participation in the Indian stock market increases.
11. Index investing to gain momentum: It is possible that we see a rise in index investing in 2024. The momentum in index investing through Index Funds and ETFs is growing in India. We think Nifty ETF, CPSE ETF, Gold ETF, etc could see even higher inflows in 2024 compared to 2023. The market is a reflection of India’s overall growth and Index Funds derive their growth directly from the overall market movement – making these good prospects. for new users.
12. SIP is the new mantra to beat market volatility: The strong SIP book in 2023 showed how retail investors in India are navigating market volatility. SIP investments are the best way to beat market volatility and Indian investors have understood the importance of the same.
13. Don’t sell in a panic or after bad news: Again in 2023, we saw the markets dip due to geopolitical tensions and recession fears after the US Fed’s announcements about inflation concerns. Those who lacked conviction and confidence sold their stock portfolio fearing a worsening geopolitical situation and its negative impact on oil and inflation. However, smart investors bought into the dips in 2023 and were able to make above average gains. BSE Sensex is up 21% since March lows in 2023. As the saying goes, “time in the market is better than timing the market.
Trivesh D, COO, Tradejini
14. Avoid being reactive: The market, if you look at the past year, was not a good teacher. The stock market is currently at an all-time high. Anyone who targets the dart earns profits, which is not a good sign. Many investors have made investment decisions based on the trajectory that the markets have taken.
15. Investing is a marathon, not a race: As we have witnessed, long-term investors have gotten good returns for their stocks this year. Those who held onto their stocks for the long term consistently outperformed, and those who jumped ship when the market wobbled lost the race. I’ve learned that the most difficult aspect of investing can be staying invested.
16. Don’t go against larger macroeconomic trends of the market: Macroeconomic factors may or may not be related to a particular country, but they nevertheless impact its stock markets due to the extreme globalization of economies. Therefore, when making projections of the stock markets and any investment decisions, it is important to consider the macroeconomic factors and their impact on the investments held.
17. Look for good stocks at discounted rates or growing stocks at fair prices: The market holds treasures for both bargain hunters and growth seekers. For those with an eagle eye, look for stocks currently trading at discount rates or focus on companies experiencing promising growth, but avoid an overvalued outing with a fair price and sustainable momentum.
Finally, the need to unlearn and adapt to changing market dynamics is articulated. Investors are encouraged to continually challenge assumptions, emphasizing that a calculated risk approach is crucial. Opportunities will come and go, but preserving capital is a constant priority in the ever-evolving financial landscape.
Disclaimer: The opinions and recommendations made above are those of individual analysts or trading companies, and not of Mint. We advise investors to check with certified experts before making any investment decision.
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Published: 29 Dec 2023, 14:36 IST