It’s time to Buy in India

At 9,120, nobody could have called the top on the Nifty after a surprise rate cut by the RBI. Upside momentum was too strong and global equities were also trading near or at record highs. Similarly, after breaching and trading well below the crucial psychological and technical level of 7,800, it is difficult to ignore further downside and call a bottom, especially taking into account the global volatility in the financial markets arising out of China and the potential US Fed rate hike. We may test 7,500 or even worse, this selling climax may drag the Nifty to 7,200.

It is in these times of panic that retail investors should be looking to build a long term portfolio. With a longer term time frame it is a prudent strategy to start and keep accumulating quality stocks given the current downtrend. Many blue-chips are now trading at attractive long term valuations. Sentiment is crucial to investment decisions and the current leadership has been quite successful in boosting the outlook for the future which is also a critical ingredient to growth.

It is visible in FDI flows as well as in stock market multiples which even after this steep fall are right in the middle of historical ranges. Gross FDI inflows rose to $46.6 billion (at all time highs) in the 12 months ended May 2015 (up 24 percent year on year), according to Morgan Stanley. Regarding government spending, National Highway Authority of India road awards for the first three months of FY16 are exhibiting strong momentum and overall government capex for the fiscal year to date is the highest in the past five years, says Barclays.

But even if US Federal Reserve head Janet Yellen hikes rates, it is very unlikely the US markets will witness the kind of capitulation they did a couple of weeks ago. Yellen will be undertaking the loosest monetary tightening in the history of monetary policy and there is absolutely no reason or evidence that a September hike will be followed by another in December. China is still a big risk but the past few weeks have given markets enough time to factor in the implications of the Yuan devaluation.

Further volatility in China may not be as painful going ahead. It is true that India's macro fundamentals are relatively solid as compared to much of the developed and emerging markets. Serious money has always been made being long. Stay optimistic and believe in the India story. Keep faith and patience in the 15 month old NDA government. (Vatsal Srivastava is a consulting editor with IANS. The views expressed are personal.)

By By Vatsal Srivastava