Indian benchmark index Nifty hit a new record high of 22,186.65 in the previous session (February 19) and traded less than half a percent away from another peak in today’s session. The recent jump was on the back of general support from the global markets, return of flows from foreign portfolios in Indian stocks, moderating inflation and other positive macro indicators.
With the December quarter earnings now showing better than expected results and amid a lack of more direct signals, investors are now focusing on the upcoming general elections in 2024. Investors are positive as the polls and voter sentiment suggest the return of the current government in the next elections.
Although experts believe that markets will hit more new highs as we approach the elections and the RBI is set to cut rates in the second half of this year, what should be your trading strategy in this record environment? What should your portfolio look like? Here’s what experts said:
Tanvi Kanchan, Head – UAE Business & Strategy, Anand Rathi Stocks and Share Brokers
For investors looking at the long-term perspective, short-term volatility can be used to increase exposure in sectors that are lower than long-term averages, as well as increase substantial exposure in the portfolio. Allocation between equity and debt according to tenor and risk profile can be kept in the range of 60% – 70% in equity and balance in debt for an aggressive investor.
Deepak Jasani, Head of Retail Research, HDFC Securities
Investors would do well to rebalance their asset allocation and equity portfolio to realize profits from the equity portion (if it exceeded the allocated percentage). Within stocks, stocks that have significantly outperformed their fundamentals and peers should be viewed from a full/partial exit perspective. With elections around the corner, we are entering a volatile period. Therefore, the above will insulate the portfolio from sudden large shocks and at the same time make it possible to participate in the market upward movement as and when it occurs.
Neeraj Chadawar, Head – Fundamental and Quantitative Research, Axis Securities.
We believe style and sector rotation will be critical in alpha generation moving forward. With the intensive reaching of Mid Caps and Small Caps in the last two months, we believe that the margin of safety at current levels has reduced compared to that available in Large Caps as per valuations. With this view, the broader market may see some time correction in certain pockets in the near term and flows are likely to shift to l large caps. However, the longer-term story of the broader market continues to remain attractive. In this context, the theme “Growth at a Reasonable Price” and Quality themes look attractive in the current juncture. Therefore, we recommend that investors remain invested in the market and maintain good liquidity (10%) to use any downturns in a phased manner and build a position in high-quality companies (where the earnings visibility is relatively high) with an investment horizon of 12. -18 months .
VK Vijayakumar, Chief Investment Strategist, Geoit Financial Services
The market is likely to remain resilient amid volatility. Valuations are overpriced in the broader market. A safe investment strategy is to focus on high quality large caps.
An important characteristic of the bull market is its ability to set new consecutive record highs. And this market has done that consistently. This year alone Nifty has set 6 new record highs (intraday) and this is indicative of the strong momentum in the market. FII selling, triggered by rising bond yields in the US, has no impact on this uptrending market where DIIs (bought). ₹17850 crore in February so far) and domestic HNIs and retail investors are calling the shots.
High quality fundamentally strong large caps like RIL, ICICI Bank and Bharti taking the lead in the rally is positive for the bulls. It’s also important to remember that large caps have valuation comfort in this market, where segments of the broader markets have flipped into frothy valuations. As the Bank Nifty is about 4% away from its record high, more action likely in banking stocks.
In the near term volatility will be high. Sharp corrections can happen at any time.”
Apurva Sheth, Head of Markets Perspectives & Research, SAMCO Securities
Indian markets are likely to trade range bound for the next few days and Nifty may move from 21,500 to 22,200. A clear trend will emerge only after the market breaks out on either side of this range. One can maintain a stock specific approach and pick stocks that have delivered good quarterly numbers in the current earnings season. Contrarian investors can look for opportunities in private banking stocks that have so far not participated in the rally.
Disclaimer: The opinions and recommendations made above are those of individual analysts or trading companies, and not of Mint. We advise investors to check with certified experts before making any investment decision.
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Published: 20 Feb 2024, 14:19 IST