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Pick quality stocks to beat volatility: Analysts

This article was posted on Aug 19, 2009 and is filed under Stock Views

MUMBAI: Looking for investment cues from Dalal Street? Well, that is the last place you should be looking to for long-term directions, say investment experts.

Consider this: Until a few weeks ago, everyone was waiting for the first quarter results of companies. Then suddenly the news of a likely (at least a partial) drought started coming in, sending everyone into a sombre mood. This is despite the fact that the corporate performance has exceeded all expectations.

The mood was lifted dramatically when data showed that industrial production had picked up. Then again the market fell in tandem with Shanghai, only to rise again on Tuesday. Is there a method to the Dalal Street madness?

Absolutely none if you care to listen to investment experts. ‘‘The market is on a flimsy ground. There is no firmness at all as everyone is sitting on the fence. Everyone wants to buy and sell simultaneously. That is why there is so much volatility,” says Arun Kejriwal of Kris, an investment advisory firm.

‘‘The so-called investment gurus don’t have a clue. They were all talking about how this is the right time to buy till the other day, but now most of them are asking people to sit on the sidelines with cash. That actually says they don’t have a long-term view,” says a mutual fund manager, who doesn’t want to be quoted.

But does that mean Dalal Street is acting silly? Of course not. But it simply doesn’t offer you any investment direction, say experts. ‘‘Be it corporate results or news about drought or industrial production figure, all these factors could have changed the course of the market for good or bad,” says Kejriwal. ‘‘But the impact of these factors is not going to last forever,” he adds.

That is why he believes investors are better off sticking to their investment decisions, rather than changing them according to market mood. ‘‘You make money in this market only on your conviction, not by following people’s recommendations blindly.”

That is one reason why you would be better off sticking to the golden principle of buying stocks with strong fundamentals and holding them through the volatility. ‘‘This may sound predictable, but buying quality stocks and holding them is the only way to make money in such volatile conditions,” says the fund manager. Kejriwal asks investors to be wary of stocks that are part of ‘‘momentum pack”. ‘‘If you get into one of those stocks, you should be prepared to face higher amount of volatility,” he says.

source: Economictimes

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