Hello Sir,
Hope you are doing well.
In the last 1 month there has been flurry of good news for Investors who have a 3-4 years investment horizon or more. Let's look at them:
'SIP stoppage ratio, the ratio of closed accounts under SIP to new account openings, shot to 27 months high of 0.68 in Feb against long-term average of 0.51'
Clearly, those who wanted quick returns and didn't know about market cycles are losing interest and clearing way for medium-long term investors to accumulate stocks at good valuations. Here's another one:
'Individual investor participation in shares dropped to 34 months low in Jan'23.
Daily cash market average volumes of non-institutional investors (Retail and HNI investors) were at 22,829 crore in Jan'23. This is the lowest since Mar'20 and 61% below peak of 58,409 crore in Feb'21’
Source: Economic Times
How is this good news for medium-long term investors?
If you have been investing for 8-10 years or more, you will realize that such times usually prove to be good periods for accumulating stocks for medium-long term.
As the investor participation is low, one gets good stock prices and enough time for gradually building a position in the stock.
Check out the below data on investor participation in earlier years.
Source: BSE India
FY 01, FY 08 and FY 18 marked the peaks of equity turnover and the same also coincided with the peaks of broader market.
The turnover dropped significantly in FY 02, FY 03, FY 09, FY 12, FY 13, FY 19 and FY 20 and coincided with market lows. We know how markets went up in 2020 and 2021 after the lows of 2019.
Another chart which indicates that it’s a good market for accumulation is the Google Trends – Multibagger chart.
Source: Google Trends
The above graph depicts investor participation (through google search for term “multibagger stock”) at various points of time.
The chart peaked out just around the time markets peaked out. Similarly, Google Trends – Multibagger chart bottomed out around the time markets bottomed out.
Currently, Google Trends – Multibagger chart is around 2019 lows.
If you accumulated stocks in 2019, you got greatly rewarded in 2020-22.
We think something similar will pan out over the next 2-4 years.
Remember, we don’t expect immediate gains. In fact, the markets could remain rangebound or in a slow decline mode. But, unless you know how to perfectly time the market and buy just at the bottom or just before the up move starts, it’s a good time for medium-long term investors for accumulating stocks.
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Happy Investing.
Best Regards,
Ekansh Mittal
Research Analyst
Web: https://www.katalystwealth.
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