Expert advice: Should you spend 25% of your income on investing in stocks?

In an interview with ETMarkets, Bhave, who has over 25 years of experience across the financial services industry in India, UAE, and Vietnam, said: “We believe that a few midcap companies with strong management and robust business models will potentially become large caps over the next 3-5 years” Edited excerpts:India has turned out to be the bright spot in the global arena.

How do you see markets in the medium term?
India’s long-term structural growth story remains intact, and this is the main reason why domestic equity markets have outperformed their larger global counterparts since the beginning of this year.

Even after global concerns like elevated inflation, hawkish central bank policies, and geopolitical turmoil, several domestic companies are around their 52-week highs. The same is true of the benchmark indices too.

This happened on the back of the revival of FII inflows and continued domestic inflows in the form of retail participation through mutual fund SIPs, EPFO and NPS investments coupled with strong HNI participation.

This positive momentum has been built up due to fundamental economic reasons like the resilience of domestic demand, early signs of a slowdown in inflation, strong credit growth, healthier bank balance sheets, and the government’s strong initiatives on manufacturing and infrastructure spending. India is expected to have the fastest GDP growth among the world’s major economies. As always, it is difficult to predict short-term market moves, and the market is likely to move further northwards in the medium term.

Getting a robust process for stock selection along with a detailed checklist is the best way to navigate the complexity and difficulty of picking up likely future wealth creators.

a)The first and foremost filter must be competent and ethical management and saying a strict ‘NO’ to businesses with accounting and governance issues.

b)The next filter would be to select businesses with strong competitive advantages and exhibiting high and consistent growth in earnings over a sustained p ..

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