Current Market Situation and Strategy to Follow
Post the major market fall it is very inconclusive what would be the further direction of the market. On the other hand it is quite luring for every investor to pick up his stock holdings and average out the prices given the sudden fall in prices. The last time such a virus hit the Indian markets, initially the fall was only for a 2% to 4%. However later on the markets crashed for 40% in valuations. This proves that the trend set in the current situation can be a replica of the similar situation. Hence rapid investments can lead to major monetary loss for a large period of time. Hence in such times what should be the best options to be executed?
If thought deeply it is quite very clear that the markets are not always going to be in red. There would be times when it would bounce back and achieve new heights. However the speed of the recovery can be different than the current situation. So the best strategy to follow is buying at dips in such a market. The market situation can change anytime and the bulls and bears are always up to each other’s necks to get hold of the market direction. Hence in such a volatile market one should definitely keep investing into new opportunities but in a proportionate manner. This strategy can lead to slow growth but it would definitely diversify the portfolio holding and hence keep the same balanced.
Do Nifty50 Stocks and Sensex Stocks Have the Potential for Growth ?
It is definitely true that the markets are going to boom in the long run. This means the evaluation of the stocks in Nifty50 and Sensex would boost eventually. However this is the option to be executed by the long term planners and not the traders. Even investors prefer to risk some percentage of their investments in hopes for a higher percentage of returns. Lets understand the same with an example. In the previous bull rally, the analysis shows that the prices of every Nifty50 stocks have not given returns better than 30% in the rally. However on the other hand the stocks such as Reliance Power, Yes Bank, Vodafone Idea, IRCTC, IEX, Tanla etc. have given multibagger returns.
Thus investing in Nifty50 stocks can be the best option for the long term perspective. But for a constant return rate one needs to follow the trial and error method and pick up stocks for a monthly to quarterly basis. Sometimes even the time frame can be less than 15 days but such strategy can give returns up to 20% every month on the risk taken.
Selection Basis for the Stocks ?
There are few pointers which can be followed while picking up stocks. The best one is to note out the support and resistance levels. This means picking up the stock specific price range and betting on it on the basis of the volatility around the support and resistance levels. The other method is finding stocks that have touched a very high price in the rally and are currently trailing in a low range. This option allows a specific amount of return surety given the stock’s price history.
Next method is to pick up segment wise stocks which have a higher amount of business in the next quarter. This can be depended on the seasonal increase and decreases of sales, along with liquidity, expansion plans and funding requirements. Alongside this there are stocks who have not deteriorated in valuations as much as the market have fallen. On the other hand their value remains stable and hence they have a potential for string reversal once the bull rally onsets again. Let’s mention some stocks on the basis of such criteria.
Let’s start with the current seasonal trends. The market trend shows that with the onset of the Virus the Pharma stocks giving medical support to immunity and fight against COVID can give better returns due to higher sales. This includes stocks such as Cipla, Zydus and Glenmark Pharma. Also with the winter season going on the companies with a wool and cotton product portfolio will record higher sales for the quarterly results. This means one can also target Welspun.
On the other hand with the onset of EV in the Indian Economy, it has become very sure that the future of automobiles is going to be electric. Hence one can always invest into some EV stocks whenever such dips occur. This includes companies with direct and indirect links to the EV industry. These are Tata Motors, Mahindra, Tech Mahindra, Tata Elxsi, Tata Chemicals, Sona Comstar, Tatva Chintan, Amara Raja Batteries, etc.
With the low valued stocks in the fall the list gets pointed out towards SBI Cards and Payments and PAYTM. These Stocks are trading at their lower prices. In other words they are almost around their lows of 52 Week and had a gain of more than 30 to 40% in their 52 Week highs. Thus they present a very high return possibility in the near future.
There are a lot of such stocks like Yes Bank (stable and no major fall), Adani Power (Scope for better returns with a high of 160 Rs.) etc. Hence constant investigation into stocks at the time of such fall can give very high returns in a short span of time.