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Whatever goes up must come down -- this is the irrefutable truth. Market analysts kept chanting this maxim when Sensex was scaling dizzying heights not too long ago.
However, as if to prove the analysts right, the market soon came crashing down and now it's hovering around 13,000-mark.
The market is extremely volatile at this stage and is causing major concern to investors. What strategy should you adopt now? Which stocks should you buy, sell and hold?
Can you make money out of the stock markets even at this stage?
In an hour-long chat on rediff.com on Wednesday, Dr Sanjiv Mehta replied to many such readers' queries. Here is the transcript:
sanjiv mehta says, hello this is sanjiv mehta very pleased to be with you. however i take macro views on asset classes including equities as opposed to taking views on individual stocks, therefore my answers will be in similar vein.
dj asked, your views on the indo-us nuclear deal passing and its effect on the indian stock markets, will it be a plus or a minus in your view
sanjiv mehta answers, at 2008-07-09 16:01:40india should do well in the long term and this view is based on its being able to sustain a high trajectory of growth for quite some time. the nuclear deal with its broad strategic ramifications will be good for the country. consequently, stocks which are a long term asset class in any case will benefit.
neovivekkk asked, where do u see crude going from current levels???? how is going to affect our market ????
sanjiv mehta answers, oil presently has demand and supply characteristics which are very close to each other. both show very little inclination to change in any way in the near future. demand pattern still has not shown any modification while efforts to gear up supply sources have been slow. therefore probability of breaching 150 usd a barrel is high. however, price of usd 4 a gallon will gradually start affecting demand pattern and even if we do not see a major decline, oil trading in a range is quite possible. indian economy should still be able to grow at a reasonable rate if oil trades in a range rather than continuing to go up steeply.
suresh asked, SIR, I AM A RETIRED PERSON, I WOULD LIKE TO KNOW IF THIS IS THE RIGHT TIME TO INVEST IN SHARES AND MUTUAL FUNDS WITHOUT ANY RISK OF LOSING MONEY,THANKS
sanjiv mehta answers, stocks is for the long run and goes through volatile periods. there could be periods where it will go down and that's why apprpriate time horizon is very important. for example at current valuations if you invest part of your assets in diversified well regarded equity funds with a 3-4 years horizon, that should be safe and should produce reasonable returns.
kulin asked, Is This the right Time to start buying in the Mkts?If Yes then which Stocks or Sector?
sanjiv mehta answers, there is good value in the market although negative factors are still there in the short term. my recommendation will be to invest in systematic way in tranches rather than lump sum. best way will be to invest in diversified equity funds .
kulin asked, Is This the right Time to start buying in the Mkts?If Yes then which Stocks or Sector?
sanjiv mehta answers, there is good value in the market although negative factors are still there in the short term. my recommendation will be to invest in systematic way in tranches rather than lump sum. best way will be to invest in diversified equity funds .
ashishN asked, I plan to invest in DSP India T.I.G.E.R. Fund - Growth HDFC - GROWTH FUND - GROWTH Sundaram Select Focus-Appreciation Sundaram Select Midcap-Appreciation JM Emerging Leaders Fund - Growth Plan. Is it a good choice of funds? Please advise.
sanjiv mehta answers, sundaram select focus i regard very highly- very consistent performance for a good duration of time. in this correction also, it has fallen less than its peers. DSP tiger was a good performer till recently, here also with its fall it has become a good buying opportunity at current levels. Midcaps have corrected sharply- i regard reliance growth and DWS investment opportunity to be good funs in mid cap space.
ashishN asked, I plan to invest in DSP India T.I.G.E.R. Fund - Growth HDFC - GROWTH FUND - GROWTH Sundaram Select Focus-Appreciation Sundaram Select Midcap-Appreciation JM Emerging Leaders Fund - Growth Plan. Is it a good choice of funds? Please advise.
sanjiv mehta answers, sundaram select focus i regard very highly- very consistent performance for a good duration of time. in this correction also, it has fallen less than its peers. DSP tiger was a good performer till recently, here also with its fall it has become a good buying opportunity at current levels. Midcaps have corrected sharply- i regard reliance growth and DWS investment opportunity to be good funs in mid cap space.
upashu asked, With the perspective of 3-4 years,which mid-cap or small-cap stock will be better for good return?
sanjiv mehta answers, multiple research studies show that asset allocation is the key to a good portfolio performance-it accounts for 95% of a portfolio return while individual security selection accounts for only 5%. for example, today it is much more important to determine what percentage to be allocated to indian equities as an asset class rather than which stocks. therefore it is much safer, time effective and productive to select funds managed by a well regarded and full time professional manager. i will recommend reliance growth, dws inv. opportunity in the mid cap space.
upashu asked, With the perspective of 3-4 years,which mid-cap or small-cap stock will be better for good return?
sanjiv mehta answers, multiple research studies show that asset allocation is the key to a good portfolio performance-it accounts for 95% of a portfolio return while individual security selection accounts for only 5%. for example, today it is much more important to determine what percentage to be allocated to indian equities as an asset class rather than which stocks. therefore it is much safer, time effective and productive to select funds managed by a well regarded and full time professional manager. i will recommend reliance growth, dws inv. opportunity in the mid cap space.
arindam asked, Please honestly tell me two mutual funds where I can invest in for next 10 years through SIP Route. I started investing in HDFC Equity and now it's performance is worst. Now experts are advocating for HDFC TOP 200 or HDFC Growth. Quite impossible for me as I am already commited to HDFC EQUITY till 2009. Please suggest me atlease two good MF names
sanjiv mehta answers, sundaram select focus i recommend highly for large cap . reliance growth for mid cap has shown tremendous consistency.
pooja asked, Hey sanjeev!! All that you have replied to is the same statement moulded according to the questions enquired. Can i get a simple answer from you on what to invest in and also till when the market will regain its original position.
sanjiv mehta answers, that's a very good question since you have noticed the common thread in the answers. actually investing has some very consistent principles including time horizon, valuation and diversification. if those are followed, overall portfolio performance will be very good.timing of a turnaround is always difficult to predict and therefore if fundamentals are good, you have to be in it to win it. therefore, based on economic fundamentals and with a 5 year horizon, i will recommend a decent allocation to a diversified portfolio of indian equities . i will also add small percentages to global equities, real estate fund and commodities including gold. of course, liquidity and safety part of your portfolio will be in debt funds.
MKSAO asked, IF GOVT FALLS THEN WHAT IS THE FUTURE OF MARKET
sanjiv mehta answers, some political uncertainty is already priced in the market. the probability of a future stable coalition will be the major determinant of stock market behaviour.
sanjiv mehta says, it was a pleasure to be with you and really enjoyed interacting.thanks a lot.
Mehta is the founder and managing director of www.financedoctor.com