Avoid high-risk stocks: Analysts

Party on the street has lost its rhythm.

The Sensex's 542-point fall on Friday has tempered the outlook on the Street. Analysts are now advising investors to avoid high-risk stocks given the extreme volatility in the days to come.

Market watchers say investors can seize the opportunity to buy as the fall - which occurred globally following concerns over the US mortgage market - may not affect the India growth story.

"High beta sectors such as construction and real estate may lead the downward rally. Capital goods could be one of the top laggards since their stocks have gone up in a short interval," said a fund manager with a public sector mutual fund.

The BSE Realty index was one of the biggest losers on Friday, shedding 5.25 per cent.

Analysts are, however, bullish on media and telecommunication sectors. An increase in subscriber base in the first quarter of the FY08 and a market share of 23.5 per cent have ensured Bharti Airtel tops domestic investors' and foreign institutional investors' (FII) shopping list. The BSE-FMCG index suffered the least damage on Friday, falling by 0.12 per cent. "The FMCG sector does not go with the markets and displays contra cues. It has its own set of fundamentals," said a research analyst with Khandwala Securities.

Investors can also go for stocks which are not affected by cyclical downturns or the rupee appreciation, said analysts. Thus, IT and textile counters will fail to make the grades. Cement counters have already suffered enough damage, he added.

"Since there is so much of negative news for the cement industry, I don't see a major revision. They will stay at current levels or may see a marginal decline on Monday," said Niraj Vinayak of Crisil. The BSE Midcap Index fell by 2.83 per cent, while the BSE Small Cap Index fell by 2.69 per cent on Friday. "Though the fall has been smaller compared with the 30-share Sensex, investors will not like to bet on midcaps and small caps in volatile times," said an fundamental research analyst.