Market guru Anthony Bolton, Author of Investing Against The Tide and president, Investments at Fidelity International, tells Devraj Uchil that investors should remember that sentiment are as important as fundamentals, and should forget about the price they paid for shares. He feels that most markets have bottomed out, but would take 6 to 12 months to put worries behind them.
Why do you say that bull market has begun when things look as gloomy?
The economy is not a good indicator to time markets. They often paint a picture of gloom and unnerve investors. Historically, bear markets don't last long. I am looking at a bull market that will last for years.
There is so much cash on sidelines there will be a steady and sure upturn in the market. That is when many who feel left out jump in and further spurt the market.
What is your perspective on India?
Indian markets are likely to experience slow pick-up in earnings, aided by investor sentiments. When an investor feels good about his investments he gains confidence to invest more and this process takes time.
The positive is that valuations are close to historic lows in India. Another positive is that Indian investors are far less dependent on credit as compared to their global counterparts.
What should an investor learn from a downturn?
An investor should remember that sentiments are as important as fundamentals and forget about the price he paid for the shares. Understand the risk and hold your nerves in times like now. Keep your eyes open and do not get shaken out of your investment.
How do you see US markets behaving?
The exposure of individual investors in US to stock markets is very low. At the same time, the money market has gained to stand 47 per cent of the size of US stock markets. This means that there is a lot of money waiting on the sidelines to enter the market.
I would say sentiment is improving because directors of US companies were noted purchasing stocks. This is an indication that the markets are likely to improve. Things are also looking good in housing and used car sales area.
What areas would you suggest for investments?
I would suggest putting money is the financial sector. They were the reason for recession and the worst to invest for some time. But when markets turn, they are the cheapest stock and would yield handsome returns. Other sectors I would suggest are consumer cyclical sectors, technology and value stocks.