Sensex @ 60,000 Nifty ~18,000

By S P Tulsian
about 26 days ago

Indian Stock Markets: Still Ripe for Investments

In the past 2 months, BSE Sensex rose from 53k to 60k while Nifty nearly scaled 18k, from 16k level, implying 13% return in 2 months. In other words, Indian stock markets have delivered 6% return which is typically earned in one year from debt instruments, in just 1 month, for 2 consecutive months!

For the last 1 month, experts, media and even investors were worried on one-way rise, and were expecting 10% correction, terming these index levels unrealistic. But BSE and NSE having swiftly breached new milestones, all seem to have now turned bullish. 

However, despite stock markets at all time peak, small retail investors feel left out or missing out on the party. And rightly so, as retail investors seldom invest in BSE 30 or Nifty 50 stocks; and even if they do, they invest with a time lag and that too in stocks, which have already risen in past month. Take for example, Nifty 50 stocks like Tata Steel, JSW Steel, Tata Motors fell 15-17% in past 2 months, while those like Asian Paint, TCS, HCL Tech, Bharti Airtel rose over 15-17%, in which retail investors have low holding.

Stocks and sectors rotation is the norm of market. Hence, investing based on the absolute rise or fall in index levels has never been and can never be a profitable strategy. Anyway, retail investors are attracted more towards micro, small cap, penny, junk, weak promoter, operator driven stocks, and then comparing portfolio returns to benchmark is absolutely futile! This is like comparing coal with 24 carat gold! 

So how can retail investors make profits in the stock market?

Following are our pointers for successful investing in Indian stock markets:

  1. Stock Allocation – Always invest 50% of your equity portfolio in frontline stocks like HDFC Ltd, HDFC Bank, TCS, HCL Tech, Asian Paints, Adani Ports, HUL, Divis Lab and the likes. Filter out Commodity Stocks, PSUs and other expensive stocks from Nifty 50 for building an investment portfolio.
  2. Balanced Portfolio - Portfolio should have 16-18 stocks maximum. Allocate about 25% in mid cap, 15% small cap, 5% micro cap and 5% cash in the portfolio. Mid and small caps help generate outperformance while frontlines build a strong portfolio, while delivering benchmark returns.
  3. Avoid Tracking Too Many Experts – Suspicious investors, out of greed and bias, hold too many number of stocks in the portfolio, while also follow many experts for advice, which often causes more harm than good.
  4. Hold On to Growth & Conviction Stocks – Small investors often become traders in the ‘2% SL and 5% profit booking’ theory, missing the forest for the tress! Hence, important to think big and not book out early. Hold on to growth and conviction stocks till their full value is realised. Participate in the small-caps-turning-mid-caps and mid-caps-promoting-to-large-caps.
  5. Theme-based Stock Picking – like Strategic PSUs sale (e.g. BPCL, BEML, CONCOR, SCI, Hind Copper, Bank of Maharashtra), Change in Promoter (e.g. CG Power, McLeod Russel), Debt Restructuring (e.g. Jain Irrigation, Patel Eng), Undervalued Stocks (e.g. Orient Cement, Steel Strips Wheels, Wheels India, JITL Infra) etc. 
  6. Likely Ratings Upgrade - Global Rating Agencies Moody and Fitch are likely to revise India’s Investment Outlook upwards by March 22. And Outlook revision precedes Rating Upgrade, similar to Suryodaya ke pehle Arunodaya (Arun, the Saarathi of GOD SURYA is seen before Sunrise).
  7. India Growth Story – Over the past 2 months, FIIs have signalled their bullish view on India, by buying IT, FMCG, Private Sector Banks, due to country’s rapid economy revival, continued government infra spends, under a stable political leadership. In this scenario, pessimists and anti-Modi elements are feeling left out.

Imbibing these mantras in your investment philosophy will definitely make you a Prosperous and Happy Investor!




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