IS IT RIGHT TIME TO INVEST IN EQUITY ?

There are  various compelling reasons for investing in equities at this juncture. First, if you look at the data for the past 30 years, our equity markets broadly move in five year cycles. Since returns from the stock markets have been disappointing in the past five years, there is every chance of mean reversion. When returns have been poor and the broad swathe of the investing public is shunning equities, that is the best time to buy stocks.

Second, it has been widely commented that the Indian economy has suffered due to the government's policy paralysis and that the India growth story is structurally damaged. I believe this whole "structurally damaged economy" hypothesis is overly pessimistic. Like any other free-market economy, the Indian economy too goes through its cyclical ups and downs. We are probably at the bottom of an economic cycle and will emerge from the trough in the next year or so, hopefully helped by favourable election results. As we emerge, the stock markets will pick up in anticipation of growth.

Is it ever a good time to invest in the stock market? Not really. Looking back at history, there have been plenty of reasons to sit tight with your cash and wait for a better time to put your money in the market.

Consider just a few of the scary events that have shaken even the most experienced investor's confidence in the future of the national and global economies:

1950s: Korean War, creation of the Warsaw Pact, Cuban Revolution

1960s: Cuban missile crisis, Vietnam War escalation, American spy plane shot down over Soviet Union

1970s: Arab oil embargo, Stagflation, Watergate

1980s: Savings and Loan crisis, Latin American debt crisis, failed military attempt to end the Iranian Hostage Crisis

1990s: Asian financial crisis, Persian Gulf War

2000s: September 11 attacks, subprime lending/housing meltdown, Great Recession

2010s: Nuclear threats from North Korea, Greek bailout and eurozone crisis, mortgage delinquencies peak above 14 percent

Still, throughout it all, investors who kept on keeping on throughout the decades wound up making money over time, even with the rough patches that hit every single decade.

Time Heals Many Wounds

The other reason that 20-year time period matters so much is because of Benjamin Graham's famous quote on how the market behaves.

Graham, the man who taught value investing to Warren Buffett, noted that over the short term, the market acted like a "voting machine," but over the long term, it acted like a "weighing machine."

Even as U.S. stock indexes hit all-time highs, Warren Buffett predicts they'll go "far higher" in the long run.Right now, he very much favors equities over bonds, warning some investors could lose a lot of money in long-term fixed-income assets when interest rates eventually start to rise.