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Why The Beaten Down Quality Businesses Could Be The Best Stock Market Investments?

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This is the best time to start your stock market investment, as markets have corrected significantly over the last few weeks and many good quality stocks are currently available at huge discounts.

Domestic stock markets have taken a big hit over the last few weeks due to multiple factors such as a slowdown in developed markets, US-China trade wars, and escalations in US-Iran tensions. The biggest blow in recent times to stock market has been dealt by the proposed tax surcharge on super-rich in Budget 2019. As a result of this foreign investor sold off stocks worth over Rs 3,000 crore in Indian stock markets during the month of July.

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With many quality stocks trading at good discounts, it is the best time to use a bottom-up approach, while choosing good quality, beaten-down stocks for your stock market investment. History of stock markets in India gives us a good lesson of why an investor should make full use of market corrections to choose beaten down good quality stocks for stock market investment.

Remember the 2008 crisis. Not just in India, but the world over pessimistic investors were dumping stocks for whatever price they could get and fleeing the stock markets during the global crisis. While pessimistic investors moved to the sidelines and preferred to wait and watch, there were few optimistic investors who lapped up value stocks at bargain prices.

One look at the below table and you will see what a huge opportunity pessimistic investors lost.

There is a powerful quote by legendry investor Warren Buffett’s which summarizes what an investor should do during market corrections “Be fearful when others are greedy. Be greedy when others are fearful.”

Quality stocks with strong fundamentals possess all the right merits which can help them outperform with time. And when they outperform, the impact is obviously reflected in the rising share prices. When there is overall market correction most stocks tend to correct. But this does not mean that their fundamentals have eroded. And when the market recovers usually good quality stocks are the first to recover.

This Is The Right Time For Stock Market Investment

When you see a huge discount at your favourite store, what would you do? Well most people would buy more. The same principle applies to stock market investment too. That’s why this is the best time to choose beaten down quality businesses for your stock market investment.

Read more:  How Long-term investing helps create life-changing wealth – TOI

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