Markets have been rebounding themselves like never before. Here, the MFDs have been finding it onerous in dealing with incremental inflows. We can see that equity is the sure-shot asset class for investing for the next 10 years. Given that the phase of economic growth downtrend is over, it shows a significant upward momentum and that is where Nifty’s profit growth will be seen increasing. The structure of the market is such that, markets are sure to generate reasonably good returns.
Investors can expect some goodness post-correction in the equity markets. The equity market in the near term is like a voting machine and in the long term and more like a weighing machine. Corrections are the kith & kin of a bull market that gives an opportunity to invest at that point of the market situation. The Indian economy is outshining all the bourses and is on the verge of a vital positive move. In addition to it, the growth in the earnings is accelerating & can be seen with the hike in the profits of domestic cyclical sectors like real estate, capital goods, engineering, utilities, corporate banks, and some of the large companies in refineries & telecom space.
The best way to enter the market at this time is to avoid expensive sectors and move to cheaper sectors within the domestic cyclical space and pharma formulations specifically. Despite the pandemic, pharma funds have ended up with not-so-good returns. It can be seen that the returns of pharma funds are much lesser than large and mid-cap funds. Pharma is a stable and defensive sector, where most of the companies are presently trading at record low margins and are available at pocket-friendly valuations. Entering the sector at this time when the business cycle has already bottomed out makes it lucrative and risk-adjusted returns can be shaped over the next few years.
The pharma sector as a whole has shown huge business capabilities in the western world followed by emerging markets like India post-pandemic. Most good-quality companies are flexible cash-rich businesses, as they do not fall under non-mandatory spending.
There is an increased awareness among the young investors to take care and spend on their health. Further, companies are also improving their supply chain to ensure the availability of medicines across the country. Certain government measures like an increase in the number of pharmacies, centers, etc. will be beneficial for the sector to penetrate further.