A deeper correction in Indian stock markets could actually improve long-term investment opportunities, according to Raamdeo Agrawal, Chairman and Co-Founder of Motilal Oswal Financial Services.
Speaking at the Moneycontrol Global Wealth Summit, Agrawal said that if the market falls another 10 percent from current levels, the potential returns for investors over the next five years could become significantly more attractive.
He estimated that such a correction could push expected long-term returns to around 17–18 percent annually.
Market Corrections Create Opportunities
Agrawal highlighted that historically, market downturns have often laid the foundation for strong long-term compounding cycles.
He pointed to the period following the COVID-19 market crash, when the benchmark index delivered around 21–22 percent compounded returns in the years that followed.
According to him, investors who build well-selected portfolios during market corrections could potentially generate even stronger gains, sometimes reaching 30–35 percent returns.
Long-Term Investing Requires Discipline
While advocating a long-term investment approach, Agrawal clarified that “buy and hold” does not mean holding stocks indefinitely without reviewing the underlying business performance.
He explained that companies, like individuals, move through different stages of growth, maturity and decline. Investors should ideally stay invested during the most productive and high-growth phases of a business.
Selling successful investments too early, he said, often prevents investors from fully benefiting from the power of compounding.
Timing the Bottom Is Difficult
Agrawal also warned investors against trying to perfectly time market bottoms, calling it an extremely difficult task.
“No investor can consistently predict the exact market bottom,” he said.
However, he added that market corrections gradually make valuations more attractive, creating better entry points for long-term investors. Opportunities are now beginning to emerge across both large-cap and mid-cap stocks as valuations adjust.
Price vs Value: A Common Investor Mistake
According to Agrawal, many investors judge a company purely by its short-term share price movement rather than its intrinsic value.
He described the market as operating through two forces — a price machine and a value machine.
While stock prices fluctuate frequently, the underlying business value may remain strong.
A company’s stock price may decline for several years even when its operations continue to perform well, he noted.
“Many investors know the price of a stock but not its intrinsic value,” he said, adding that understanding business fundamentals helps investors remain confident during volatile market phases.
Massive Potential in Digital Platforms
Agrawal also highlighted the long-term potential of digital and platform-based businesses, driven by evolving consumer behaviour.
He believes this sector could eventually create an industry opportunity worth ₹50–100 lakh crore.
Many companies in this space are currently experiencing rapid expansion, with some achieving 70–100 percent growth rates, though profitability remains limited at this stage.
Over time, he said, only a few players are likely to emerge as dominant companies with valuations potentially reaching ₹25–40 lakh crore.
Conviction Is Key for Investors
Agrawal concluded by emphasising that strong conviction in a company’s business value is essential for long-term investing.
Different stocks may follow very different investment journeys, with some delivering quick returns while others take years to reward investors.
However, investors who focus on business fundamentals rather than short-term price movements are more likely to benefit from sustained long-term compounding.
Originally published on 24×7-news.com.
