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Russia has launched an armed forces attack on Ukraine and the event has sent shockwaves across the world. Indian markets have not been immune to the same and have witnessed a massive selloff. This is a time when investors will be tested for their patience and discipline. Markets are choppy and will probably remain this way for some time, but that should not deter a serious investor. The underlying reason for remaining long on India (as an investment) remains strong.
Reasons why one should not panic and go long on India –
-Balance Sheets stronger than ever: India’s corporate health is the strongest in a long time - deleveraging has been seen across sectors and cash reserves have surged. As a result corporate confidence is high.
-Promoters are optimistic about the business potential: This reflects in the increasing promoter holding in NIFTY 500 over time, increasing from 32% to 45% over the last decade. Interestingly, post-Covid, promoters have increased stake by ~3%
-Private capex cycle is making a come back
·-Public capex still strong with the Government giving an impetus even in the recent Union Budget. The budget has put in place a virtuous cycle that we expect would drive a multiyear growth cycle by focusing on (1) sustaining economic recovery through demand-side measures and (2) supply-side reforms with the objective of kick-starting the investment cycle and encouraging private sector participation 3) announcing benefits directed towards domestic production and manufacturing especially in emerging sectors like clean energy, etc. , which is critical for India’s medium-term growth prospects.
-China plus one strategy is helping drive demand in specific sectors
·-PLI scheme is a big game changer that is encouraging and supporting domestic production
-Green energy transition for India is opening up a whole new investment opportunity for the investors
-Moving in and out of investments based on undue reliance on recent performance is likely to result in excessive trading and inferior performance results. This is the time to revisit the basics, have confidence in the long term potential of India and remain invested in the same.
(Nitasha Shankar is head of PRS Equity Research at Yes Securities)
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