Investment advisers are asking clients to redraw their investment plans in view of the unprecedented slowdown in the economy and the alarming pace of deceleration and large scale exit of foreign institutional investors from the Indian market.
From one of the fastest growing economies, India is now facing the slowest expansion in six years.
Several sectors of the economy have been struggling. GDP growth slowed to 5% in the three months to June from a year ago, lower than predicted and below the average 7-8% quarterly expansion seen in the past few years.
This prompted Goldman Sachs Group and Citigroup to cut India’s growth projection to 6% for the fiscal year through March 2020.
There are other disquieting factors. The economy has been shedding jobs, banks have curbed loans and farmers’ incomes have been subdued. The jobless rate jumped to a 45-year high of 6.1 per cent in 2018.
The automobile sector, which makes up almost half of India’s manufacturing sector, had to cut thousands of jobs because of slowing demand. Consumer goods companies are fast reducing prices. Businesses are curbing investments.
However, investment advisers say the present negativity should not dishearten sensible investors though it is easy to lose perspective in a falling market. If past experience is any indicator, the market’s resilience power has resulted in a fast recovery.
This time around, such quick recovery is remote as the slowdown is worse than expected and the full recession, if at all, story is yet to come by.
Don’t write off now
“It is too early to write off the India growth story. For the long term, the investment scenario is rosy. Investors usually tend to look at other emerging markets when the India outlook gets gloomy. Don’t look at other markets, where the situation is much worse and unpredictable.
“The Indian economy is still fundamentally strong, and the present crisis is temporary. India is the best bet. Let better sense prevail,” said Tirupat Mehta, managing director, WISE Consultancy, Financial & Business Advisors, Dubai.
Investment advisers say there is money to be made during weaknesses. “Falling market is always a good opportunity for long-term investors. Many stocks are available at attractive valuations which have sound fundamentals. It is time for long term investors to put their money to play and invest in quality companies,” he said.
He also advised that investors should focus on rebalancing the portfolios to benefit from the recovery in the long run.
“My advice is to build a portfolio that will perform in the long run. For the time being, remain loyal to SIPs, particularly with portfolios including growth stocks and bonds.
“As the Indian currency falling at an ‘attractive’ pace, NRIs have the opportunity to build their portfolios on a long term basis. This is also opportune time for investing in property in India,” said Binoo Nayyar, chief financial officer, TrendRiser Securities, Dubai.