Money Today's eighth year, which we complete with this Anniversary issue, has been quite exciting. The country's political landscape has changed with the Bharatiya Janata Party (BJP) winning absolute majority in the last Lok Sabha elections and Prime Minister Narendra Modi firmly installed in the saddle. As we close this issue, two more states-Maharashtra and Haryana-have voted the BJP to power. Huge expectations are building up in the capital markets. Everyone expects the new government to push for major reforms, leading to greater foreign direct investments and portfolio flows into the country.
There has also been some good news on the macro front. Inflation has come down sharply (WPI stood at 2.38% in September 2014, a five-year low, compared to 7.05% in the same month a year ago) through a combination of global factors - ranging from lower commodity prices on account of Chinese slowdown to sliding global crude prices. Lower inflation might enable the Reserve Bank of India to cut its benchmark rate, which, in turn, could fuel GDP growth. Stock market sentiments have turned bullish since the new government took charge. From the beginning of the year, the BSE Sensex has risen nearly 30%.
Although it has retraced slightly over the last couple of weeks, experts believe that we are at the beginning of a multi-year bull run. As often happens when market sentiment turns euphoric in any bull run, wild predictions are being made about how far the indices could climb. The mood is infectious and it would be easy to get carried away. But retail investors should remember that bull runs are always tricky to ride. While they can make millionaires out of the lucky and the wise, they can also trample the less experienced investors. There have been innumerable instances where people have lost huge sums by riding on the wrong stocks during a bull frenzy where every stock seems attractive.
In our cover package this anniversary issue, we try to ensure that you, dear reader, are fully aware of the various risks that are lurking in this bull market and the strategies you can follow to avoid unnecessary risk without losing out on profits. In bull markets, companies and issue managers often try to create massive hype around Initial Public Offers. We tell you how to differentiate the good issues from the bad.
We also explain why it is important to keep your portfolio balanced and not get carried away by the euphoria to create a stock-heavy portfolio. We tell you how a diversified portfolio, including fixed income instruments and mutual funds, helps in minimising risks. There are many more tips that would help you to invest wisely and create wealth. All this will ensure that while you take advantage of the rise in the stock market sentiment, you do not end up betting your shirt on it.
In sync with the market mood, over the past twelve months, we have brought you a fair dose of equity investing advice. In August 2014, our cover story (Bargain Stocks) brought to you investing options among the less expensive stocks, while in December 2013 (Stocks On a High), we looked at the best picks among stocks that have doubled since the global slowdown of 2008. Our April 2014 issue (Equity Investing: Myths Vs Reality) explained why many common investment strategies may not work.
At other times, we looked at how one can make money through social networking sites (Wealth Through Social Networking, March 2014) and the best real estate investment destinations (September 2014).
It is our endeavour to make you a well-informed investor so that you invest your hard-earned money wisely. I hope we are successful in this.
I wish you a happy and prosperous festival season ahead.