Instead of bothering about milestones, concentrate on your strategy to earn handsome returns from the market
Sherna D’mello TNN
Last Tuesday’s US Federal Reserve rate cut was just the push the markets needed. The sensex had been hovering around its life-time high of 15,869 for over a week when the Fed action on September 18 saw it shoot past the 16K milestone. And it hasn’t looked back since then, with the benchmark index closing the week at 16,564—a 6.4% gain over last Friday. So is this time for investors to think about booking profit or is there more money to be made in this bull run? It’s a tough call with experts clearly divided on the future outlook of the markets. A section of market experts believe the 50 basis point cut (100 basis points = %) bps rate cut by the US Fed was ahead of expectation and thus a positive surprise. This prompt action has allayed concerns about a slowdown and will be positive for equities across the world including India. It translates into movement of more money to the emerg-ing markets. The rate cut might also prompt the Reserve Bank to cut rates, which would be positive for cyclical and interest rate sensitive sectors such as banks, autos, metals. A rate cut by the central bank would also boost earnings growth in financial year 2009. “Investors should buy into frontline, blue-chip stocks such as RIL and SBI even at the current levels. The India story is strong and there is an average 15-20% growth year-on-year in these stocks,” says Dawnay Day A V Securities director, stock broking, Seshadri Bharathan. This is a good move for a long-term investor looking to make fresh investments. However, other players feel the market is overbought and valuations are stretched. The sudden upsurge in the sensex after the Fed cut its rates by 0.5% instead of 0.25% as expected was euphoric. It’s hard to tell how long that uphoria will last. Reading between the lines, the 50 basis point cut is a preemptive move on the part of the Fed. The cut is intended not just to reduce disruptions in the financial markets, but also to ward off a recession in the US markets. Crude prices, at over $80 a barrel, are rising to record highs. On the domestic front as well political undercurrents are uneasy with a possibility of elections ahead of schedule. Further, the latest set of IIP numbers has revived the talk of a possible slow down in the industrial growth going forward. “In essence, what we are saying is that, whereas directionally there is nothing much to worry as far as the way forward is concerned and, the markets shall continue their northward journey. However, intermittent blips cannot be ruled out,” said Religare portfolio management services CIO Kunj Bansal. In this scenario, a short-term investor might want to book some profit at this level, especially if he has met his investment target. And if you want to enter the market the smartest move would be to buy on dips. When the market goes into an intermediate correction, that’s a great opportunity to pick up high growth stocks. If all the information seems contradictory and you’re still unsure, there’s another option for investors who want to get a piece of the action in the markets. Just leave it to the experts. When investing in the stock markets the right exit from a stock is as important as the entry. The best opportunities right now can probably be found in the midcap and small cap segment, where share prices are quoting at 16 to 19 times of the average earnings per share. But for small investors, it’s a big challenge to pick the right companies to invest. Therefore, it is advisable to invest in the market only through mutual funds. There are a host of funds to choose from and you can pick one that suits your needs. A good pick would be a diversified equity fund. It’s a good idea to study the track record of a fund before investing in it and compare it to other funds in the same category. Don’t make your choice simply based on the returns when the markets were moving up-during a bull phase most mutual funds will make money. The real test is to see how the fund performed when the markets were going down and trading was volatile. If it didn’t perform too badly in these phases you may have a winner.
Sherna D’mello TNN
Last Tuesday’s US Federal Reserve rate cut was just the push the markets needed. The sensex had been hovering around its life-time high of 15,869 for over a week when the Fed action on September 18 saw it shoot past the 16K milestone. And it hasn’t looked back since then, with the benchmark index closing the week at 16,564—a 6.4% gain over last Friday. So is this time for investors to think about booking profit or is there more money to be made in this bull run? It’s a tough call with experts clearly divided on the future outlook of the markets. A section of market experts believe the 50 basis point cut (100 basis points = %) bps rate cut by the US Fed was ahead of expectation and thus a positive surprise. This prompt action has allayed concerns about a slowdown and will be positive for equities across the world including India. It translates into movement of more money to the emerg-ing markets. The rate cut might also prompt the Reserve Bank to cut rates, which would be positive for cyclical and interest rate sensitive sectors such as banks, autos, metals. A rate cut by the central bank would also boost earnings growth in financial year 2009. “Investors should buy into frontline, blue-chip stocks such as RIL and SBI even at the current levels. The India story is strong and there is an average 15-20% growth year-on-year in these stocks,” says Dawnay Day A V Securities director, stock broking, Seshadri Bharathan. This is a good move for a long-term investor looking to make fresh investments. However, other players feel the market is overbought and valuations are stretched. The sudden upsurge in the sensex after the Fed cut its rates by 0.5% instead of 0.25% as expected was euphoric. It’s hard to tell how long that uphoria will last. Reading between the lines, the 50 basis point cut is a preemptive move on the part of the Fed. The cut is intended not just to reduce disruptions in the financial markets, but also to ward off a recession in the US markets. Crude prices, at over $80 a barrel, are rising to record highs. On the domestic front as well political undercurrents are uneasy with a possibility of elections ahead of schedule. Further, the latest set of IIP numbers has revived the talk of a possible slow down in the industrial growth going forward. “In essence, what we are saying is that, whereas directionally there is nothing much to worry as far as the way forward is concerned and, the markets shall continue their northward journey. However, intermittent blips cannot be ruled out,” said Religare portfolio management services CIO Kunj Bansal. In this scenario, a short-term investor might want to book some profit at this level, especially if he has met his investment target. And if you want to enter the market the smartest move would be to buy on dips. When the market goes into an intermediate correction, that’s a great opportunity to pick up high growth stocks. If all the information seems contradictory and you’re still unsure, there’s another option for investors who want to get a piece of the action in the markets. Just leave it to the experts. When investing in the stock markets the right exit from a stock is as important as the entry. The best opportunities right now can probably be found in the midcap and small cap segment, where share prices are quoting at 16 to 19 times of the average earnings per share. But for small investors, it’s a big challenge to pick the right companies to invest. Therefore, it is advisable to invest in the market only through mutual funds. There are a host of funds to choose from and you can pick one that suits your needs. A good pick would be a diversified equity fund. It’s a good idea to study the track record of a fund before investing in it and compare it to other funds in the same category. Don’t make your choice simply based on the returns when the markets were moving up-during a bull phase most mutual funds will make money. The real test is to see how the fund performed when the markets were going down and trading was volatile. If it didn’t perform too badly in these phases you may have a winner.
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