The euphoria in the market is going strong and how! Already on a high thanks to better-than-expected corporate earnings and no negative news from the Budget 2021, the benchmark Sensex breached its 52,000-mark on Monday after data showed the retail inflation stayed within the Reserve Bank of India's target range for the second consecutive month. The retail inflation (CPI) stood at 4.06 per cent in January, the lowest in 16 months.
When green indicators are all around the stock market, the fear of missing out (FOMO) is obvious. But, exercise caution. New investors should avoid investing lumpsum whether in stocks or mutual funds. If existing investors are being nervous, they should book profits strategically but should not exit the market completely, say experts.
"I suggest one should keep booking profits at regular intervals. Timing the market is very difficult. I would say 25 per cent of your investment can be booked now and if the market goes up by 5 per cent more, book further 25 per cent and so on. I don't see a major correction soon, so if you see 5 per cent market correction, you may like to buy back the 25 per cent, which you sold at a higher price," says Vivek Bajaj, Co Founder of Stock market analytics platform StockEdge.
Sectors to watch out
Every Tom, Dick and Harry rise when markets are up and high. The reality bites only when the tide turns. That said, it is time to choose stocks wisely. Core economy and cyclicals are expected to perform well. With PSU stocks remaining down and out for most part of the market rally, the dark horses could be spotted here.
"We would recommend accumulating and hold core sector stocks, such as infrastructure, power & utilities, manufacturing, agriculture, automobiles, etc, where the government expenditure and execution has already started, and better financial performance is expected in FY22. Capex cycle in these sectors has already picked-up," says Vinit Bolinjkar , Head of Research, Ventura Securities.
"We would also recommend increasing positions in PSU banks, who will benefit from both corporate lending due to the start of capex cycle & infra projects and retail lending on account of higher spend on high-value discretionary items such as automobile & consumer durables," Bolinjkar adds.
Piping hot IPOs
Even as most recent IPOs have listed on a premium, one should avoid taking bets in each and every IPO for quick listing gains. "Have a clear understanding of the business model and the future growth prospect in the industry of the respective company," suggests Bajaj.
Bolinjkar of Ventura Securities agrees. "Quality and pricing are to be kept into consideration. We will see optimisation in the IPO market. Only quality businesses are expected to sustain their valuation and do well in future. One has to look at the promoters/board of directors/stakeholders, quality of the business, business outlook and valuation before investing in any IPO," he says.
What should MF investors do?
So far as mutual fund portfolio is concerned, the thumb rule remains to focus on your asset allocation and financial goals. One should consider booking profits at the current levels if one's life goal such as retirement, children's higher education or marriage or is a couple of months away.
Besides, one may look into the margin of safety of MF scheme before taking an action. "Markets have been hitting new highs, however most of the Equity / Equity Oriented Schemes have a completely different portfolio compared to Market indices. For example, Axis Bluechip Fund has only 30-odd stocks compared to 50 in Nifty. We have a proprietary system that analyses the margin of safety of an MF scheme depending upon individual stocks. This helps investors take informed decision and not worry about the market levels!" says Omkeshwar Singh, Head- Rank MF, Samco Group.
"New investors may consider balanced advantage or aggressive hybrid funds so that they need not worry about asset allocation between the debt and equity. The fund manager will take that call as per the market conditions," he adds.