Time to go value hunting
The runaway inflation in agri products has virtually tied the RBI’s hands. Worse, it has tied the UPA in a bind. Inflation continues to stalk the economic policies of the UPA and this stalker isn’t going away anytime soon. The reasons are simple. When you create an asset bubble in land prices, the cost of produce will have to rise too. After all, the producer of agriculture goods is no social worker. He is as much an entrepreneur who takes on different risks like rain prospects, government policies, export bans, import threats, pest attacks, demand drops and middlemen’s manipulation. For all te. risks, the farmer needs entrepreneurial rewards. What better reward can there be than a higher price for his produce? The farmer is taking his reward & leaving the inflation footprint firmly on the economy. That is exactly what the UPA’s economic policy ordered.
Bargain hunting is a constant pursuit. That’s the only way it works.
Value investing works differently at various points in the stock market cycles. When markets are selling at very high valuations (Sensex PE >22 ), the chances are that value investing tries to find investment opportunities that are cheaper than the broader market. This invariably leads to buying at valuations that are merely relatively cheap in comparison to the broader market. This usually won’t work too well. The true test of value investing is only when stocks trade at valuations that are absolutely cheap. When the markets trade at lower valuations (Sensex PE> 16), we tend to find much better value in the stocks outside of the sensex. The current market valuations clearly favour value hunting in stocks outside of the sensex. Value investing will work very well at current valuations.
Race like a tortoise. The markets will keep pace with you.