By: Pravin Palande, T Surendar/Forbes India
Around this time last year, Mumbai was still impatiently waiting for the arrival of the monsoons. It would have been the season’s best reprieve for anxious investors who were till then reeling under the heat of a global market meltdown. In retrospect though, it may have been the ideal starting point for Indian investors.
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Exactly a year before now, in our first cover story on the markets, we had recommended that investors resume buying. We had recommended a portfolio of 20 stocks that would mirror an array of opportunities the Indian economy presented.
A year later, barring two companies, the portfolio has ended with positive returns. Three companies P&G, Page Industries and Pidilite have returned 100%. Five other stocks gained 70%.
On the whole, the Forbes India 20 portfolio was up 54%, compared to 45% of the mid-cap index (most of our recommendation was from this category). The broad market went up by 15% during the same time.
To be honest, there were enough easy pickings. Many companies were powering ahead before the global bust and yet, their valuations had fallen off the cliff. Almost all our stock picks had a strong domestic story that helped insulate them from the global instability.
But that was last year. Many Indian companies are now quickly reaching their pre-slump level in sales. Having scaled back expansion plans, they will soon churn out their full capacities, leaving little headroom for volume growth.
Investors have already guessed that Indian companies will continue to perform well, and lapped up stocks at prices that have already discounted the current financial year’s earnings.
Our considered opinion is that any investments in the stock market may not yield above-average returns in the next one year.
