The long haul has just begun.

FII’s are taking out money now. They are always opportunistic” I heard an investor crib about how FII’s were bringing our markets down. Why should FII’s remain invested if they find opportunities elsewhere that are more attractive? It is natural that they choose the best among global options. When they do move money across markets, the country which sees outflows will take a hit. India is now in that position. Two things are now clear. One, rising US interest rates will lead to investment outflows from all emerging markets(EM’s) back to developed markets. Two, within the EM’s, there will be reallocation of money among countries. With Indian markets seeing great domestic investor exuberance extending for months together in the post elections 2014 phase, our valuations had run significantly ahead of earnings. Earnings of companies seem to be slowing and this only made things worse for our stock market, Our investors always have a habit of taking our markets for granted. We either think our markets can’t go up. Or, we are fully convinced, that our markets can’t go down. We end up making wrong judgements when we view equities in either manner. Markets going down is an opportunity to invest more aggressively. On the contrary, rising markets give serious headaches to investors looking for bargains. A correction in Indian markets is just what a savvy investor would like now. And, it looks like the savvy investor is getting what he wants. The question is whether we count ourselves in the savvy camp or, in the herd. The time to make up our mind is near. Stock prices are headed towards levels where it will reward those who stand up and show conviction.

Even in the worst of times, the stock markets always throw up good parts to buy into.


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