How to invest in the markets right now

I have been receiving a lot of queries on whether this is a good time to put money in the markets and how to go about investing in the market right now.

If you are new to the market
This is a god sent opportunity to put your money in the equity markets right now. Fundamentally we are a strong Indian economy (see no reasons for drastic change in fundamentals). I would recommend the following strategy (something which quite a few ‘experts’ too have been touting), each time the market falls 5%, put in 20% of your total allocation towards equities. I would strongly recommend picking some Nifty stocks and select mid caps. Any of the blue chip stocks (e.g. RIL), stocks in the infrastructure and related construction space, Cairn are excellent picks at the moment. One can also diversify by picking select banking and auto stocks like ICICI Bank, SBI, Maruti, Tata Motors. NTPC is a great pick when compared to valuation of Reliance Power. However, NTPC is usually a slow moving stock and hence can test investor patience in a bull market.

If you are already invested

Stay invested. Unfortunately there is nothing much you can do about it right now but sit patiently and wait. I suggest – take a long cheap vacation (or take a cheap vacation so that it seems long), go to temples/churches/mosques often and pray real hard. Per experts, markets could test august 2007 lows (close to 4000). But nobody can predict accurately how low the market will go from here (CMP nifty at 4545 while writing this article). Moreover, nobody can actually catch the market at the very bottom. (It will not take time for views to reverse if the trend reverses. Then we will have experts on TV telling us about new highs our markets will be testing). Remember, that given reasonable PE of 20-22 times in FY12 and earning CAGR of at least 20%, we should see Sensex at 45k levels in 2012 (CMP Sensex 15,059). And Warren Buffet is a great example for teaching us that long-term investments do pay in the end.

Real life horrors

Recently I have been meeting some clients who are really worried. No, it is not about the stock markets but it is about school admissions for their child/children. From the stories I heard, it seems that the business of imparting primary education through schools is a great business. Parents will go to any extent to pay bribes (mind you, no one wants to officially quote any school or person lest their child’s chances in getting school admission get jeopardized.)
Here are some real stories about school admissions in New Delhi
1) As soon as the short-list of this not-so-great school was put up on the school board (this was for admissions for kinder garden age 3+), a stampede of parents ensued. One man made his wife climb on top of his shoulders so that she could see the list from a height of 10 feet and read the short-list.
2) During the same stampede, there was a lot of push and shove by parents. One parent told another, you A** H**e, don’t you dare push me. I can push you back and really hard. (Hang on, I thought these were parents! How did they start behaving like school kids)
3) This one is a typical experience of most parents – they go for an interview for their kid of 4 or 5 years of age. The kid gets quizzed on identification of pictures and numbers and rattling off A-Z while parents get grilled on their education background and more importantly personal details like salaries.
4) There are other schools who claim to have fancier processes. For example, some schools have points system. So you get 10/10 if you are an NRI who has returned to India, 10/10 points if parents of the child have had an inter-religion marriage. In addition, there are points for the GD (group discussion) conducted for parents. This is not one of those IIM GDs but a mass interview where a panel of school directors line up parents and one by one each parent is asked “why would you like your child to join this school?” Ultimately when results come out, no reasons are sited as to why your child did not make it through the process. Sometimes I wonder if parents are over reacting to the importance of where you get a school education from. Did Kishore Biyani, Sunil Mittal, Arcelor Mittal, Narayanmurthy, Arundhati Roy, Aamir Khan attend the best of all schools. And anyway, when articles are written about successful people, everybody mentions the college they went to, rarely the school. Or is it that college gets determined by what school you went to?