he current euphoria in the benchmark index has again made traders and analysts quite bullish on the markets, who believe that the Sensex may even cross the 21,000 level by the year-end, provided there are no external shocks.

A majority of investors, however, are not sure. They think that the current euphoria is only short-lived and the markets may again start going southward or may become highly volatile on a bout of negative news or once profit booking sets in. So, whether to invest or not to invest is their current dilemma.

Thankfully, investors’ concern is shared by a section of market experts who believe that despite the current market exuberance, retail/household investors should tread cautiously at least for now.

“The overwhelming response on the first trading day following the verdict of the people in the general election represents the confidence among investors in the new government riding on the plank of stability and continuity of reforms. However, this is a time for the retail/household investors to tread cautiously while investing as we can expect a short-term correction,” says Bundeep Singh Rangar, chairman of advisory firm IndusView Advisors Ltd.

Explaining further, he says that the upcoming budget will be a critical stage for the government to introduce some fast-paced development initiatives on one hand and show some financial prudence to control/reduce fiscal deficit on the other hand. “On that account, we should not expect the government to be very generous, and might resort to measures like increasing taxes or maintaining some sector-specific policy checkpoints, which would affect the stock market moves. Therefore, the timing of taking a decision when to enter the market will be crucial,” he adds.

Analysts believe that panics and euphoria are always short-term phenomenon. Therefore, once the jubilation over this verdict gets over, the realities of the tough economic environment will start sinking in and markets are likely to face significant profit booking in the days ahead.

“This correction should, however, be used by investors who have not bought earlier at lower levels to buy for the long run. While markets in the last two trading sessions may have moved ahead of expectations, yet we feel there are significant improvements in both the domestic and international markets which give us the confidence that a bottom of the markets certainly seems to be in place. Hence corrections may be swift and sharp, but are not likely to change the overall sentiment again,” says Ashish Kapur, CEO, Invest Shoppe India Ltd.

In fact, while the budget may have some provisions to increase taxes to achieve the FRBM targets, there are various positive announcements on insurance, banking and divestment of PSUs etc which may help lift market sentiments. “On the whole, we are bullish on the medium-to-long-term prospects of the market and advice investors to buy on weak days,” says Kapur.

Dinesh Thakkar, CMD, Angel Broking, also believes that in spite of the present euphoria, “we must maintain a degree of realism without stretching this feel-good factor too far.” He, however, also advises the retail investors to stay put and invest more money at every decline.

Explaining the reasons, he says, “We believe India is strongly positioned for extraordinary growth in the decades ahead because of its demographics, low financial leveraging, and firm governance. Our economy has the potential to grow at a rate of 8% for a few decades, and hence, market participants can expect 15% growth in corporate earnings for a decade or so. Consequently, we believe that the projection of breaching the 21,000 level on the Sensex will come true, although it may not happen now. But the market will continue to advance higher for decades to come.”

Sudip Bandyopadhyay, MD, Reliance Money makes a case for fundamentally-strong stocks. He says, “Short-to-medium-term prospects of the stock markets look bright, and the same seems to be case with their long-term prospects also, if FIs keep pouring more money into the markets. Therefore, there is no harm in going in for fundamentally-strong stocks.”

And it would help much if even the fundamentally-strong stocks are bought with a medium-to-long-term view. Says Ashu Madan, president equity broking, Religare Securities Ltd, “Once this immediate volatility subsides, one can surely invest in fundamentally-strong scrips (preferably mid-caps) with a medium-to-long-term view.”

Thus, while the current stock market euphoria looks great, there is need for small investors to tread cautiously and go only for fundamentally-strong stocks, if they will. However, if they are willing to invest just for making quick bucks, then they are better advised to stay away from the market.
Thus, while the current stock market euphoria looks great, there is need for small investors to tread cautiously and go only for fundamentally-strong stocks, if they will. However, if they are willing to invest just for making quick bucks, then they are better advised to stay away from the market.

SOURCE: Economictimes

Tags: best calls, how to invest, nse bse, retail investors, share market, stock market

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