Vijay Kedia shares formula on how to pick stocks during correction 

Market veteran Vijay Kedia in an exclusive interview with BTTV shared a formula on how to pick stocks during a downturn in the market. Replying to a query on how to pick stocks that could become potential multibaggers, Kedia said during a market correction talking about potential multibaggers is premature.

"A sick person first needs to come out of the ICU and recover before he starts discussing anything else. Similarly, investors should not focus on multibaggers. They should identify stocks where there is a possibility that the downside may be limited," said Kedia.

Nobody can identify the exact bottom. But if a stock has already corrected 40–50%, investors may consider buying it, provided they believe the risk of a further substantial decline is relatively low. They should focus on stocks where the possibility of further downside appears limited.

Elaborating further, Kedia said he has a formula called RISE.

R – Renewable Energy

I – Infrastructure

S – Security

E – Emerging Themes

Security includes cybersecurity, physical security and defence-related businesses and Emerging themes include artificial intelligence, blockchain, electric vehicles, semiconductors and data centres.

Kedia believes there could be a significant shortage of electricity in the coming years and companies related to the power sector and their ancillary businesses could present new opportunities.

He believes these are sunrise sectors.

Many stocks in these sectors have already corrected significantly from their earlier highs and have become relatively cheaper. However, investors should not assume that buying these stocks today will result in immediate gains.

Investing is a game of patience.

Commenting on the PSU stock particularly defence and railway companies, Kedia said he believes 
the future of these sectors is very bright.

Talking about the defence sector, Kedia said Defence Minister Rajnath Singh recently spoke in an interview about India's plans to procure defence equipment worth around Rs 2 lakh crore from domestic sources.

The sector has a bright future in the wake of the security challenges India faces.

China is a bigger threat to India than the United States. Investors should understand this.

Its approach and intentions are sometimes difficult to predict. These developments make the defence sector strategically important.

The defence chief also made an important statement highlighting that India is significantly behind China in terms of technology, particularly in border-related capabilities.

That was a very important observation.

However, Kedia pointed out that, these stocks are relatively expensive compared with the broader market.

They may continue to command premium valuations and may not become cheap anytime soon but Kedia is 
positive about their long-term prospects.

On public sector companies, Kedia said he particularly likes public sector banks considering their impressive financial results these banks are reporting. Kedia said many of those stocks were available at single-digit price-to-earnings multiples.

He believes there was potential for reasonable returns in this segment. These stocks may not become three-baggers or four-baggers, but they could provide a cushion to investors in the current market environment, Kedia added.