What should investors do is the question after Friday’s carnage on Dalal Street.
Amid the uncertainty, there isn’t one answer to investors’ query about where to park money. Some market participants advise staying away from equities and the debt market. Some differ and say these are the opportunities to make a long-term portfolio by picking beaten-down quality stocks. They also suggest looking at the bond markets from at least a two-year perspective.
According to them, investors can consider export-oriented companies (mainly in the information technology sector) and take a long ‘buy’ call on severely beaten-down selective public sector banks. However, they suggest avoiding counters where foreign institutions’ holding is high.
“Investors should take this opportunity to look at asset allocation and realign their portfolio. I would gradually get overweight in equity. And, in fixed income, one should benefit from very high interest rates and lock in the same through fixed maturity plans (FMPs) and bond funds,” says Anand Shah, chief investment officer (CIO) at BNP Paribas Mutual Fund.
“What investors should not do is panic. A crisis is also an opportunity,” said Arvind Sethi, chief executive officer (CEO) at Tata MF. According to him, one should stick with the investment plan. “Tactically, equities are beginning to offer value and the debt market is providing terrific opportunities to lock in at very good yields for one to five-year FMPs,” he added.
G Pradeepkumar, the CEO of Union KBC MF, agrees that for long-term investors, such drastic falls are opportunities. “Staggered investment is what we are advising to our clients,” he said in a text message.
Ambareesh Baliga, managing partner (global wealth management) at Edelweiss Financial Services, said: “In a fluid situation like this, valuations might not have any meaning. If the crackdown continues, one must exit, as the next level for the Nifty could be around 5,200. In case the markets bounce back after today’s fall, one should use the opportunity to exit and take a cash call.”
Gopal Agarwal, the CIO at Mirae Asset, is not in favour of a cash call at this juncture. “I would suggest investors deploy money in sectors which can have a trigger. Valuations are good and the risk-reward ratio is quite favourable, though there could be pain for some more time. The markets, currently, seem to be ignoring the positives of good monsoons and several reform measures due to the CAD (current account deficit) factor,” he says.
The market posted its steepest fall in two years on concerns that tapering US stimulus could lead to selling from foreign investors. Also, capital control measures from the central bank raised concerns that the FII confidence could be dented.
Experts believe stocks with high FII stakes could be the most vulnerable in case overseas investors press the sell button. Following are the top and bottom five Nifty stocks and sectors with highest and lowest foreign holdings.