First, cut out all the noise and clutter around you and get back to basics. This is because 90 per cent of the people around you are as clueless as you are. So, when you let the facts speak for themselves, you have a better chance of eliminating ambiguities. Let's find out what these are.
Fact 1: The equity market is NOT a lottery ticket. Every share has a fundamental value and is based on the company’s performance.
Fact 2: It is possible for share prices to be widely different from their intrinsic value.
Fact 3: In the long run, share prices always move towards their true value depending on the profitability and growth potential of the company.
Fact 4: Irrespective of whether the United States goes into recession or the sub-prime problem generates more losses, India’s economic growth rate will still be comparatively high.
Fact 5: Unless we have some serious calamity, a political crisis or poor monetary or fiscal policy, we may continue to see over 7 to 7.5 per cent growth rates over the next 5 to10 years.
Fact 6: If the economy continues to grow at such a healthy rate, it has to reflect in the corporate performance as well. This will lead to appreciation of the share price sooner or later.
Keeping these facts in mind, the long-term outlook for India still remains quite positive.
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