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Opportunities in Volatile stock markets

Life has changed in many ways after the recent attacks on Mumbai. There is a newfound aggression among voters who have turned more demanding on their elected representatives. On the stock markets, though the attack did not make a negative impact, the developments after the attack have been interesting. One interesting development has been the cabinet reshuffle which in turn has pushed up the bar of expectations. The general consensus is that the new FM's team will usher in reforms and rate cuts to boost spending on the infrastructure front. At a time when the private sector has been left to combat liquidity and slack demand conditions, a helping hand is expected to come from higher public spending.

While the stock market was indifferent to both terror attacks and cabinet reshuffle, there is a feeling that the weak sentiment in the domestic economy is more to do with emotion. Many argue that companies have turned over-cautious in the wake of global developments and are going all out to curtail costs.

While life hasn't been easy for many employees, the corporate actions in the last 1-2 months are likely to shorten the life of the slowdown, as many have begun to believe. While no one is expecting the current quarter to be impressive, the forthcoming two quarters will offer an insight to the coming financial year. With elections round the corner, the process of recovery of the domestic markets is expected to begin from the third or fourth quarter. The argument is that by then the new government would be in place here, and the US would have completed a major portion of its journey through recession.

It is in this background that investors are being advised to begin the process of investing through accumulation, though a bull run is not in sight at least for the next 18-24 months. While it is easier to jump into equity during good times, the prospects of good returns are high when you play the waiting game for the bull run. Since market returns are directly in proportion to the staying power of the investor, those who take a long-term view of more than two years have little to complain in the current environment. Though many argue the current bearish phase in equity markets across the globe is more painful than in the past, the process of recovery could be in much faster this time due to a global push. More importantly, the domestic economy is in a better growth phase than in the past despite being a more globalised economy.

As a result, fresh investors making an entry at the current market level have very little to worry about as they have the advantage of buying into equity at three-year old prices. Such an opportunity may not exist with other options. Since equity allows investors to invest in small lots and at regular intervals, investors can allocate a good portion of their corpus for their future portfolio. While the weakness and market volatility may rattle many, the fact is volatility is an integral part of equity investments and lack of it will take the sheen out of it. Even if you are not a trader, the fluctuation in stock prices should please you as it provides an opportunity to pick your stock or fund at regular intervals. Next time, when you read about a 500-point swing in the index, look at it as a good day for your equity shopping.

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