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When there is an uptick in the equity markets, many investors try to time the market. Few of them are sceptical about the markets and hence, adopt the ‘wait and watch’ methodology. They believe that the markets are overvalued and hence wait for a correction before entering the markets. While there are few investors, who jump on-board when the markets keep touching new highs.

However, not many investors understand that even a bull/bear run in the stock markets undergoes several phases, and it is a Herculean task to determine which phase the market is going through, how long it would stay there and how that would impact the short-term long-term investments.

Investing in stock markets should be tyrannized by the following factors:

1. Specific need / financial goals
2. Quality of investments

Specific need / financial goals: If a guileless investor is looking out for a steady return without significant risks, then they should invest in fundamentally strong large-cap equities, and which will help them to grow their wealth with time. However, if an investor is looking out for more returns and is comfortable with the affiliated high risk, he may consider small-cap and mid-cap stocks which are capable of giving high returns In such cases, the partnering with a credible expert will help them to mitigate the risks to a large extent, as advisors can mentor them on when to exit and enter, optimal portfolio allocation and periodic portfolio rebalancing.

Quality of Investments: Stock market fluctuations can be nerve-wracking. The prices are driven by demand and supply, micro and macroeconomic indicators and investor’s sentiments. Rather than trying futile attempts to time the market, one should pay careful attention to the quality of the investments. Also, since the markets are moving up and down every single day, it doesn’t mean investors should alter their investment methodology as per every move. Risks get reduced to a notable extent when you have a long-term horizon of 3 years and above.

To encapsulate the story, investors should strongly focus on the quality of stocks and should espouse the healthy investing regimen comprising of patience, perseverance and discipline.

Warren Buffett in one of his interview stated that ‘Buy and hold’ strategy is still his best strategy and when asked about his favourite holding period, he quickly replied ‘Forever’.

“If you aren’t willing to own a stock for 10 years, do not even think about owning it for 10 minutes”
– Warren Buffett

Read more:  How Long-term investing helps create life-changing wealth – TOI.

I have been extremely bullish on the medium to long term trajectory of India’s economic growth.

Instead of going into the past, let me share with you some reports – reports from respected organisation that are currently being ignored by the media.

Why? Simple, fear sells much better than anything else.

1. As per recent IMF study, India is projected to be the fastest growing economy in the world. Real GDP growth to register CAGR of 7.6% between 2015-25.
2. Domestic savings allocation to equities to aggregate close to $250 billion by 2025 (as against $40 bn in the past 10 years), 50% more than what FIIs have invested since 1993.
3. As per McKinsey report, India will have 69 metro cities by 2025, housing close to 80% of urban population and contributing close to 80% to urban GDP.
4. Market Capitalisation to touch $4 trillion (very conservative estimates) by 2025 (roughly 10% CAGR), given that Corporate India has demonstrated successfully its ability to manage RoE and valuations look reasonable.
5. As per the study by TeamLease Services, India can supply 25% of the increase in the global working age population by 2025.
6. Size of banking assets in India to reach $30 trillion by 2025 from current levels of $1.5 trillion, a CAGR of 30%.
7. As per KPMG study, India’s manufacturing sector, worth $220 billion has the potential of crossing $1 trillion by 2025, with its share to GDP swelling from current 15% levels to 25-30% in 2025. This sector alone is likely to add nearly 100 million jobs.

I think I’ll stop here and ask you a question. I am sorry if my words are harsh, but allow me to ask this.

For how long are you wanting to stay bogged down based on biased news that are targeted to delay your wealth creation journey?

We’ve seen people wait in 2002, and then enter markets when they had already run up.

We’ve seen people exit the markets after the 2008 fall, only to miss out on the run-up in 2009.

Well, the choice at the end of the day would always be yours.

Read more:  How Long-term investing helps create life-changing wealth – TOI.

The BJP led NDA government is back with a bang in power with a massive mandate and the stock markets have responded positively to this by breaching new highs. At this juncture, one important question raging across the minds of most investors is “which are the best stocks to buy for next 5 years?’’

The result of 2019 general-elections was a very important win for the incumbent government who have initiated many reforms over various sectors to uplift the structural foundation of the Indian economy.

This massive victory of Modi led NDA signifies not just the end of political uncertainty but also means the additional reforms in the pipeline. Surely this is the right climate for the investors to a look for the best stock to buy and build a strong portfolio for the next five year.  But rather than looking for the best stock to buy, investors should look at the bigger picture as to which sectors are likely to benefit the most from government’s policies the most in the next 5 years.

The best clue to sectors which will outperform in the next 5 years can found in BJP’s poll manifesto.

Some key points announced in BJP’s poll manifesto for 2019 general elections:

• Rs 100 lakh crore to be spent on infrastructure in 5 years
• National Security – Strengthening Armed Forces

Let’s take a detailed look at each of these promises and businesses which will benefit from them:

Rs 100 lakh crore to be spent on infrastructure in 5 years

In its poll manifesto for 2019 elections the BJP had announced that the government’s primary focus would be on infrastructure development which will includes water grids, modernization of railways, construction of 60,000 kms of national highways and way side amenities along national highways, increasing the number of regional airports and port capacities.

The poll manifesto also mentioned urban development by in the form of new townships and urban centres.

These massive push in infrastructure will be beneficial for businesses operating in the cement, construction, capital goods & engineering sector. Hence some of the best stock to buy can be found in these sectors.

National Security – Strengthening Armed Forces

India is one of the world’s biggest importer of defence equipment. Government wants to change this by encouraging domestic arms production through private sector through Make in India scheme.

According to industry experts the new government is planning to spend over $ 130 billion for modernizing the Indian armed forces over the next 5 years.

A major chunk of these projects will be bagged with top defense equipment manufacturers in India with the expertise in manufacturing small arms, ammunition, artillery shells/guns, air defence guns, combat vehicles, missile parts, naval equipments, aerospace and communications equipments. Hence some of the best stock to buy can be found in these sectors.

India’s transformation to an economic superpower is imminent in the next 5 years. Infrastructure and defence sector will gain the most over the next 5 years and hence making these sectors hot picks where one can find many best stock to buy.

Recommended: Best Stock To buy In Stock Market

Read more: About Research and Ranking.

Over the last few months, the Indian stock market has been going through a rough patch. A flurry of challenges such as oil prices, weakening rupee, elections, trade war, etc. have gripped the Indian investors.

Prices of many small-cap and mid-cap stocks have tumbled and are now trading at low valuations.

But this was the story two weeks ago.

Coming now, the current scenario reinstates the trust in the fact that if the fundamentals of a stock and country have not deteriorated, such transient hiccups should not deter you from creating wealth in the stock markets.

There are two kinds of investors: the individuals who know about the investment in the share market and those who don’t. Here we’ll give a review of the Indian stock market and how interested investors can gain exposure.

The several reasons behind an investors’ agony are slowly evaporating. The unfortunate factors of yesterday are slowly turning in our favour.

Let’s have a look at each of them…

Ex-Fear #1. Crude oil prices: From spiking to falling…

Fears surrounding the shortage in supply of oil drove the narratives in oil markets over the last few months. This led to the oil prices touching four-year high in early-October. However, that story has now taken a complete U-turn, with oil prices entering the bearish zone. Now, the prices of crude oil have retraced from its peak level of $86-a-barrel to $71-a-barrel, which is a decline of close to 20%.

The ramp-up in production has lifted the oil stockpiles up, which resulted in fall in the prices.

It’s one of the amazing turnaround story considering a few months ago, few analysts were predicting that the $100-a-barrel oil is around the corner. Now, many analysts are warning that U.S. oil prices hitting $40-a-barrel can be a reality soon. Having said this, India being a major importer of oil, any decline in oil prices positively impacts the growth of our economy.

Ex-Fear #2. The closed chapters of amplified fear in NBFC’s

A quick flashback to the plight of NBFCs in India. At a time, when the biggest risk in the stock market was the liquidity tightening in the debt market, that affected the NBFC’s ability to access funds, now a different tale is unfolding in the market.

In the last few days, three reputed NBFC’s such as IIFL, JM and Edelweiss repurchased their commercial papers in the market.

What does this hint at?

Fundamentally strong NBFC’s that faced the heat of default by one of the leading housing finance companies, suffered a transient setback due to tightening of liquidity and negative sentiments surrounding the NBFC’s. With RBI intervening, the liquidity is improving in the NBFC space.

Also, considering most NBFC’s have reported healthy balance sheets and decent ALM positions, the fear surrounding the NBFC fiasco have calmed down now.

Ex-Fear #3. Weakening rupee? No longer now…

The rupee is up close to 2.40% against the dollar. With the crude oil prices falling, we can expect the dollar-rupee equation to stabilize further in the coming weeks.

Ex-Fear #4. NPA’s – The worst is over…

As per the report by CARE Ratings, most banks have reported a decline in bad loans in the second quarter of FY2018. Also, the provisions came down to 50,714 crore in the second quarter, which is a decline of approx. 12%.

This recovery from earlier provisioning is helping the banks post better bottom-line numbers, which can be reflected in declining NPA ratios in Indian banks. In the case of 13 banks, including SBI, Axis Bank and ICICI Bank, the NPA ratio has declined in the last two or more successive quarters.

Ex-Fear #5. Tax collections

GST collections in the month of October 2018 crossed the mark of Rs. 1 lakh crore on account of lower rates, lesser evasion and higher compliance. With this, gross direct tax collections for F.Y. 2018-19 (up to September 2018) stood at Rs. 5.47 lakh crore, a jump of 16.7% as compared to the corresponding period of last year, while net direct tax collection improved by 15.7%. This upward trend in tax collections will positively impact the growth of the economy.

What does all this indicate?

The Benchmark Indices BSE Sensex is up by 4.5% in a matter of 15 days. Backed by strong sales, PAT growth and robust consumption, the share prices of fundamentally sound good companies have surged by 10-15% backed in just a few days.

But there’s a catch here…

As we said earlier as well, few investors are hunting for reasons to worry, while few are taking note of all these opportunities to create wealth in the stock market.

As of now, we would like to conclude with a quote by Erma Bombeck, “Worry is like a rocking chair: It gives you something to do but never gets you anywhere.”

Read more:  How Long-term investing helps create life-changing wealth – TOI.

An experiment by Ralph Wanger is perhaps one of the most relevant trials ever conducted in the investing world.

Ralph Wanger is not only a great investor but a great investment writer and is known for unifying his observations into his writing.

And here is one of his most interesting observations, where he analogizes the stock market to a man walking with the dog. This man has been doing the same walk for years.

But if you have walked a dog, you’ll know it doesn’t walk in a straight line. The dog hops forward and backwards, from one direction to another either to smell something or bark at other creatures. The dog also jumps on you for no reason, and even sometimes jump randomly on benches and other things.

In short, there’s no way to predict what dog will do and which way he’ll walk.

But if you know that the owner of a dog is heading northeast at about three miles per hour, towards the museum, you will eventually also know where the dog is heading towards – because that’s where the owner is taking him.

Wanger further adds, “What is astonishing is that almost all investors, big and small, seem to have their eye on the dog, and not the owner.”

What we are trying to deduce here is that, as an investor, we often end up following the dog (markets/ticker price) than the owner (businesses behind the stock).

It’s never been easier to stay on top of day-to-day fluctuations as we see them everywhere. Twitter is shouting out loud about all the daily events, there are online forums, there’s information bombardment on your mobile through various app notifications, the journalists are busy talking about the movements of stock markets and then there are WhatsApp groups, etc.

Definitely, data or information is not the privilege anymore as everyone has access to real-time data.

And as markets go up and down every year, every month or every day, the question is not about whether you have information on the market. The advantage lies in leveraging your astute judgement to understand whether the business is heading towards the growth path to give you sustainable returns over the long run.

Since 1999, we have witnessed many micro and macroeconomic events that impacted the markets favourable and unfavourable. Witnessed natural catastrophic events, trade wars, high inflation, stock market scams, global recession, and the list goes on. And even as we underwent all this, Nifty delivered an impressive 12.7% every year. Isn’t that amazing?

However, this 12.7% returns was never linear. That is, you should know that markets never delivered 12.7% returns in a straight line like this:

• Up 12.75% from 1063 to 1198 (Nifty was at 1063 on 1^st April 1999)
• Up 12.7% from 1198 to 1350
• Up 12.7% to 1522
• Up 12.7% to 1715
• Up 12.7% to 1933
• Up 12.7% to 2178

And so on till Nifty reached levels of 11623 on 31^st March 2019

In reality, stock markets never function like this and in reality gives returns like this:

• Up by 43.74%
• Down by 27%
• Down by 0.7%
• Down by 18%
• Up by 80%
• Up by 12%

(Note: The above are the actual returns delivered year on year by Nifty during 1^st April 1999-31^st March 2005.)

The market goes through cycles, and not all years are the same. There are years of blockbuster returns, there are years of subdued growth, and then there are years where we see a drop. But even if you’re investing in the worst possible time, history says that you’ll be able to do well. The key? Time in the market and the ability to follow businesses and not the ticker price.

But to achieve such returns, you’ve to be a long-term investor who can sit tight even when markets are not right. Easier said than done, I’ve seen many investors withdrawing their investments at the first sign of worry.

But they tend to overlook the flip side: If everything in the stock markets remained glory and alright, they did get expensive day by day. And that would mean, you wouldn’t be exposed to lucrative opportunity to buy more quality businesses at low prices.

However, if you’ve been only following a dog (ticker price), you’ll miss out on substantial returns delivered by good owners (businesses).

Read more:  How Long-term investing helps create life-changing wealth – TOI. 

Completely in contrast to February last year, the markets have been in a positive mood this year.

The benchmark indices have moved up over 5.5% over the past 45 days or an even better almost 7.5% over the past 30 odd days.

And as soon as such up swings happen, the “experts” in the market all start jumping around with their new estimates of where the markets are headed.

Allow us to share a bit of history with you and also explain on why I do so.

What does this table mean?

If we see the growth story of the Indian economy from $2 Trillion to $2.6 Trillion which is a 32% growth in the economy over the past 5 years, the markets have gone up by around 62%.

With a lot of government & private agencies talking about India reaching a $5 Trillion economy over the next 7-8 years, one can only imagine where the markets would be heading.

And that’s exactly the only reason we said, if Sensex is at 40,000, so what?

We are not looking for short term upsides or short term blips. Similarly, we do not even bother for short term falls.

We know that India as an economy is probably the fastest growing economy and short term movements or short term rumours, positive or negative, will not hamper its growth prospects.

Let me add another column to the table:

The added column tells you the complete story.

If you are invested in well researched & fundamentally rock solid businesses, you will not just beat the returns given by the broad indices, but beat them by a BIG MARGIN.

So, before we conclude, let us give you a chance to do a small exercise. Just fill up the numbers in the below table and send it across to us on createwealth@researchandranking.com. It’ll be amazing to understand the views of fellow long term investors:

We look forward to hearing from you.

Read more:  How Long-term investing helps create life-changing wealth – TOI.

If you been an active stock market investor you must be definitely aware of how market corrections bundled with good growth projections serve as an opportunity of a lifetime to create wealth for successful investors.

But unfortunately, there are few investors who get worried about the mood swings of the markets and fear losing money to enter during such corrections. What they fail to realize is that such corrections are the best times to buy quality stocks at good discount prices.

Let’s understand why. It is said that numbers never lie and historical data has proved repeatedly that market corrections throw the best opportunities to create wealth.

Just look at how the Nifty behaved post every market correction.

As per the above table, Nifty dropped by 60% from its peak on 8th January 2008. An investor who entered the market during the lowest point in October 2008, would have made a whopping return of 92% in just one year. Likewise, all market corrections provide an opportunity to enter the markets at low levels, and when the markets recover, these investors were the happiest ones!

If you see the growth in Nifty after every correction, you will understand markets not only recovered but delivered a CAGR between 14-28% over the next 3 years.

Here we have mentioned the upside in the numbers from when the markets were at their bottom most, but imagine, even if you invested a little here and there, you would still be in a massive positive.

But the story doesn’t end here. Now you may think that all this is okay. But what if the markets are heading towards the next crisis?’

In fact not just markets, but even quality stocks that faced the heat of negative sentiments in the stock market were the first one to recover when markets started showing signs of revival.

Let’s take an example of Tata Elxsi. The stock fell down by 52% in Nov 2016. Many investors took this opportunity to accumulate this stock owing to its fundamental strength. Come now, the stock is now trading at INR 1,000, which is a gain of 87% in just two years after the fall. Even though the prices may fall, if the fundamentals are intact, there is no reason to worry about the value the stock can deliver for you in a long run.

But, there is a flip side of the same as well. Just take a look at the below table.

As you can see in the above table, these stocks corrected sharply but unfortunately failed to create recover. Suzlon, JP associates or DLF were actually the blue-eyed stocks of their time. However, when their fundamental strengths were tested, even though there were eye candies of many investors, they never bounced back.

For a successful investor, he would not just invest or hold on to just about any stock that has fallen, but, he would look to latch on to fundamentally strong business that are showing strong growth prospects.

Having said all this, ask yourself a simple question. What’s the most common way to create wealth in the stock market? You may think that it is buying low and selling high, and yes you are absolutely right. Share Market corrections provide you an opportunity to buy quality businesses at low levels. And as a smart investor, you should leverage on to this opportunity of a lifetime to accumulate stocks at a bargain valuation.

Well, by now you must have understood about share market corrections and its importance to create wealth. Keep watching this space for more such informative articles on wealth creation.

Read more:  How Long-term investing helps create life-changing wealth – TOI.

With Indian benchmark indices Sensex and Nifty trading significantly below their new highs achieved in May 2019, many best stocks to buy are available at cheap valuations. But cheap valuations should not be the only criteria to look at while choosing the best stocks to buy. Rather an investor should bet on performing companies.

To understand why performing companies can be considered as the best stocks to buy, let’s go back to history and see what happened during the great crisis of 2008. While markets were crashing badly worldwide as a result of the American sub-prime crisis, there were few stocks which stood out and outperformed.

In American markets it was Coca-Cola which outperformed, while in Indian markets it was Hindustan Unilever. Despite the BSE Sensex and NSE Nifty losing nearly 53 per cent and 52.5 per cent respectively the FMCG giant, Hindustan Unilever gained over 20.45 per cent between January 1, 2008 and December 24, 2008.

Two other stocks which gave positive returns in the otherwise gloomy year were Hero Motorcorp, India’s largest two wheeler manufacturer, which gained 16.6 per cent, and pharma giant GlaxoSmithKline which returned 9 per cent.

Now let’s look at the kind of gains one would have made if they would have still held on to these stocks over a eleven year period between Aug 2008 to Aug 2019.

So you can see that performing companies have not just given good returns during difficult times but also highly rewarded investors who have maintained a long term perspective. All above three companies are market leaders in their respective fields with consistent and growing earnings.

The above examples demonstrates the importance of betting on performing companies rather than buying because stocks are available at cheap valuations.

The below pointers will help you to find the best stocks to buy in India:

Do fundamental analysis while choosing stocks

Fundamental analysis can help you in choosing stocks which can give excellent returns in the future despite external factors, short-term market volatility, market correction etc. Some key ratios which can help you in fundamental analysis of stock market investments are Price-to-Earnings Ratio, Price-to-Book Ratio, Free cash flow ratio.

Look at the growth potential

When looking for the best stocks to buy in India, always choose a company based on its future business prospects. Opt for companies which can scale up its business with time.

Check the debt levels of the company

Look for companies with low or zero debt.

To conclude the above factors can help you identify the best stocks to buy in India. However, it is equally important for investor to maintain a long term perspective to enable the business to grow and realize its true potential which will ultimately reflect in its share price.

Read more:  How Long-term investing helps create life-changing wealth – TOI. 

As I was walking towards my office yesterday, I heard a loud sound. My heart skipped a beat, as I turned around and saw that some cables of a crane perched on the top of a nearby under construction skyscraper had snapped.

The load of concrete blocks which it was carrying dangled dangerously, held back by two of the remaining cables which were still in place. Within a split second, few of the concrete blocks started rushing down at great speed.

There were vehicles and people passing by on the road adjoining the building. These concrete blocks could kill anyone instantly, I thought. But what happened next was quite unbelievable for me.

The concrete blocks did not fall to the ground, instead fell on a safety net which was placed between the 1st and 2nd floor of the under-construction building.

It seemed that the site-in charge had anticipated such disasters and put safeguards into place right from the start, which essentially meant they had put a margin of safety in place.

There is a concept called ‘Margin of Safety’ in stock market investing too.

Most investors in stock markets must have heard of Warren Buffet. But many have probably not heard of British-born American investor Benjamin Graham, the man whose investment principles, Warren Buffet followed to become a successful investor and still follows while investing.

So What Exactly Is Margin Of Safety In Investing?

The margin of safety is a principle of investing in which an investor only purchases securities when their market price is significantly below their intrinsic value.

Benjamin Graham has explained this in a very simple way in his famous book, The Intelligent Investor.

The below illustrations will give you a better picture of how the margin of safety works.

Stock B looks clearly overvalued and hence there is no margin of safety. On the other hand stock A, has an adequate margin of safety.

Why Margin Of Safety?

The margin of safety is a safeguard against market volatility. Change in factors affecting a stock’s price could change the intrinsic value rapidly and that is why Warren Buffet recommends buying stocks with a higher margin of safety.

This is well reflected in his quote, ‘’When you build a bridge, you insist it can carry 30,000 pounds, but you only drive 10,000-pound trucks across it‘’.

Just like the safety net at the construction site, the margin of safety provides a cushion against errors in analyst judgment or calculation.

While investing in a stock, there are few risks we are aware of and few risks we simply fail to identify.

Benjamin Graham called these as ‘Unknown Risks’ and emphasized the fact that the margin of safety concept not just protects your investment but also boosts it. The margin of safety not only increases the probability of better returns but also helps in avoiding big losses.

Through examples, Graham reiterated that all experienced investors not only recognized but also used the concept of ‘Margin Of Safety’. For example, while choosing a bond of a company which apparently is a loan, any investor would definitely check whether the company in past has been able to generate at least 4-5 times of the interest payment. Or a bank would never lend to a company who has just enough cash flow which barely services the interest or principle repayment.

Graham used the same concept on stock valuations. He simply ensured that the company has been generating satisfactory cash flow historically & has the strength to generate the same in future too.

The whole concept of Value Investing catapults on the “Price” at which you are acquiring the stock. Because as the legendary Warren Buffet says in the 2008 letter to the Berkshire Hathaway’s shareholders:

“Long ago, Ben Graham taught me that ‘Price is what you pay; value is what you get.’ Whether we’re talking about socks or stocks, I like buying quality merchandise when it is marked down.”

It is strongly recommended to conduct due diligence and exhaustive research to gauge the qualitative and quantitative aspects of a company, which in turn will help you determine margin of safety.

Definitely, it does require some homework, time and calculations. But trust me it’s worth it.

To make things easier for you, we have shortlisted 15-20 business opportunities with enough margin of safety that has the potential of multiplying your wealth by 4-5 times over the next 5-6 years. This portfolio has delivered 77.96% returns for more than 6,000 investors over the last 32 months. Do not let this opportunity pass away.

Read more:  How Long-term investing helps create life-changing wealth – TOI. 

There are many investors who are adopting a cautious approach while investing in NBFCs. Before we start why, let us brief you a quick background on the recent developments in the NBFC space.

Non-Banking Financial services (NBFCs), including Housing Finance (HFC), segment has been in the eye of storm for the past one month. There has been an incessant flow of negative news, both macro as well as micro, that has caused this ‘confidence deficit’ towards the sector.

Chain of events that started with IL&FS defaulting on its debt obligations led to the fear of liquidity crunch in markets, this was followed by Reserve Bank of India (RBI) expressing its view of introducing stricter monitoring norms for NBFCs and the most recent development being default by some real estate developers on their debt payments to banks, raising doubts over the quality of mortgage assets held by NBFCs/HFCs.

We at R&R have analysed the facts on ground and strongly believe that markets today are driven by fear rather than the fundamentals. Stocks have been beaten down due to expectation of liquidity crunch in the market. Many believe that post-IL&FS default, both mutual funds and banks would be reluctant to lend to the NBFC sector.

We urge our clients to consider the following factors and decide for themselves, how probable is this scenario, where our economy is projected to grow at 7.3-7.5% YoY without NBFC contribution.

Our Assessment

• We would like to draw attention to a very important fact that the Indian GDP growth story of 7.5%-8.0% is primarily driven by the “STRENGTH OF THE INDIAN CONSUMPTION DEMAND”. The same will get derailed if there’s a prolonged credit crunch in the system.
• Asides, any default will be a systemic risk on the Indian financial system, which will have its ripple effects on the country’s credit rating, it would derail the FDI/FII flows and will be a huge negative for the current government in the run-up to the upcoming general elections.
• Having said that the asset-liability mismatches and near-term Mutual Fund debt maturities at some of the NBFCs may bring volatility; however, we firmly believe this situation will be managed by intervention by the regulators. It is largely the paper maturing in Oct-2018 and Nov-2018, which is of significant quantum. If this can be tide over, then the overall situation should be manageable. We have seen in the past too, RBI coming in at the time of crisis on liquidity, putting in steps like opening up the Repo window for a mutual fund, etc.
• Our view is that the concerns of this liquidity constraint cascading into distress is very much exaggerated. Having said that, the current situation warrants stricter regulation on asset-liability mismatches, which will go a long way in strengthening the NBFCs.
• We remain long-term investors in NBFCs & HFCs that have strong asset as well as liability franchises, with access to lower cost of funding, strong liquidity with lowest risk asset-liability mismatches and leadership in product segments, wherein they have pricing power backed by their strength of distribution network and swifter turnaround times for credit sanction & disbursal with healthy asset quality and provisioning coverage. In fact, we are of the firm view that many stronger players would use this opportunity to grab further market share and consolidate their position in the sector.

Read more:  How Long-term investing helps create life-changing wealth – TOI.