Recession & Stock Market Opportunities

In the last quarter (May to Sept 2019) we have been hearing about the impending recession. Are we in the middle of a recession? How is it going to affect/ or have already affected the stock market?

The simple answer to all these questions is NO, this is not a recession. For a stock market enthusiast like me the word recession is an opportunity. However, at the same time, the effect of recession on society can be very disturbing. One must understand that the recession is supposed to be a very challenging phase for any economy.

With respect to the stock market, we saw two minor corrections in prices last year. The first time from January 2018 to March 2018 and later in August 2018 to October 2018.

During both these corrections, prices of stock market indices were managed by buying in specific stock while the rest of the stock market was not performing as it should have.  For example – Stocks like HDFC, HDFC Bank, Bata India, UPL ltd, Bajaj finance which once managed to help Nifty rally had flat-lined in the period from March 2018 to August 2018.

Nifty on March 26th 2018 low was – 9958
Nifty on September 3rd 2018 Open was – 11751

During this phase, the small and mid-cap stocks plunged to newer lows and couldn’t contribute to the Nifty’s or overall market growth. Auto, Pharma, Metal were the major sectors performing bad during May 2018 till July 2019.
Example: Auto stocks like Maruti, Tata Motors, Eicher Motors & Ashok Leyland
Pharma stocks like Lupin, Sun pharma, Auro pharma.

Looking closely at the performance of these stocks, it seems like the worse is over and there are signs of a turnaround in Auto industry. In addition to this, small-map and mid-cap stocks too are showing signs of bottoming and reversal.

Having said this, I am not at all inferring that we will be booming as an economy in the immediate future. But we should not be considering this time as a recession. The worst is over and we are headed to a new uptrend. For the Indian economy, it’s a continuous uptrend.

Now the important question that arises is, how can one make most of this correction period? The answer is really simple. We all love things at a discount so how do we see discounts is that a thing or commodity that we wish to buy and if it is available on a discount during a low demand phase!
Examples
-Titan was available at 25% discount during August 2019. The rally or gain is again 25 %, Rs.1,00,000 investment in Titan in August could have fetched you 25% profit in flat 77 days.
-HDFC AMC was available at 11% discount in September 2019 from there it has given a rally of 13 % in 14 days.
-SBI Life was available at a discount of 10% in September 2019 from there it has given a rally of 28% in 28 days.

-Reliance Industries was available at a discount of 22% around August 2019 from there it has given returns of 22% in 77 days.
-Bajaj Finance was available at a discount of 20% in August 2019 and today it is giving returns of around 25% in 2 Months (63 days)
All these stocks are in discussion as per our buy system.
This Diwali identify the next possible opportunity and then make most of it.

Wish you all a very Happy and Prosperous Diwali! 🙂 

Through this article I am trying to explain recession in simple language hence I will avoid usage of GDP figures and statistics, which I feel are often manipulated to arrive at an inference.

 

1 Comments

  1. SULBHA BIRADE says:

    A perfect positive mindset.

    Jan 06, 2020 Reply

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