"People who exit the stock market to avoid a decline are odds-on favourites to miss the next rally."Peter Lynch
Investors across the world are closely observing the second term of US President Donald Trump, which began in early 2025. Many observations surrounding Trump's return are dramatic. One point many independent analysts emphasise is that this time Trump means business. This could radically reshape the global economic and political landscape, keeping investors on high alert.
However, we, Team Equity Intelligence, consistently remind the investment community that final decisions should not be based solely on macro trends. Consider the Indian economy as an example. Domestic consumption is rising, the current account deficit is shrinking, and relations with the US are improving.
Furthermore, Trump appears poised to make moves aimed at reducing oil prices and has a clear focus on addressing the trade deficit with China. These factors combined suggest that the Trump administration may not adversely affect India. In fact, India stands to be a major beneficiary of these global developments.
Short-term corrections in global markets are likely as investors adjust to the changes Trump may introduce. The Indian stock and currency markets are currently experiencing a correction phase, with a sharp decline observed since the US presidential election and the beginning of the New Year. Warren Buffett’s famous quote comes to mind: “Be fearful when others are greedy and be greedy when others are fearful.” This downturn in the stock market is not a crisis but an excellent opportunity for disciplined, long-term investors.
Benjamin Graham, the father of value investing, wisely remarked, "The investor's chief problem – and even his worst enemy – is likely to be himself." Market volatility often induces anxiety and fear, prompting decisions driven solely by emotion rather than fundamentals.
The stock market is a tool that transfers money from the impatient to the patient. When investors succumb to emotions, they focus on the next ten minutes rather than the next ten years. Maintaining long-term perspective may sound simple, but it is the key to wealth creation.
The long-term outlook for India and its businesses is promising. The nation has undergone significant structural changes between 2014 and 2024. With an average economic growth rate of 6% over the past decade, projections suggest continued growth at a rate of 6-8% for years to come. These structural changes have transformed the economy, and their combined benefits will continue to fuel business growth.
Our fundamental outlook on India remains optimistic. However, as value investors, we maintain a traditional and meticulous approach to analysing each company. Instead of attempting to predict the GDP rate at the start of the year, our focus is on identifying investable, value-generating businesses.
Every downturn presents an opportunity to grow alongside India’s structural business growth. Opportunities for long-term investment exist in every market phase. However, landmines will always be present. It is the investor's responsibility to discern opportunities and navigate away from potential pitfalls. While both opportunities and landmines will persist, meaningful corrections often increase opportunities and reduce risks.
Consistent investment over the coming decade will enable greater wealth creation than was achieved in the past. The best times for Indian businesses are still ahead.
(This is a letter published by Porinju Veliyath in January to the investors of Equity Intelligence)