THE INVESTOR DILEMA

The Stock markets across the world has been seeing turmoil over the past few weeks and the Indian Markets have shaved off 30% from the peaks it reached in Jan 08. The damage has been worse in the broader markets where individual stocks have seen erosion in market caps to the extent of 50% or more.The question in everybody's mind is where do we do from here?What should the long term investors do?

The answer is pretty simple.If one is looking at a time period of 3-5 years then this is the biggest opportunity that has come since the bull run began in 2003.Companies which have a visible earnings profile over the next two years have come to a price multiple of less than 10 and if this correction goes the way it has done in the past few months attractive dividend yields will start emerging in many quality stocks.The pain in the US Economy will continue for some more time but my belief is that over the next 2 quarters the deleveraging will happen which should put the system in a better place.Also one has to remember that the elections in US are scheduled to be held in Nov of this year and the state of the economy is going to be the key talking point.So the republicans will do all that it is possible to keep a semblance of normality in the economy to have even a feeble chance of coming back in power.What is spoiling the party is the state of US dollar and its consequent effect on the commodities.This has resulted in the cost push inflationary pressures on all economies of the world.
I expect India to come out stronger after this mess is cleared and the same investors who are not putting in the money today will come and buy the Indian market at a premium.The correction in the Indian markets have come about in a shallow market scenario where feeble volumes have contributed to the drastic fall.This definetly calls for a contrarian long term domestic Instituion with a longer term outlook to play major role in the capital markets.Time for the Govt to wake up.

Final advice to the long term investor-Remain invested in good quality stocks,buy the stocks you like with a 3 year perspective and you will be rewarded handsomely.