Many want to take a holiday, but it would be smart to reassess and rebalance portfolio.
For retail investors, the past 10 days couldn’t have been worse. The Bombay Stock Exchange Sensitive Index, or Sensex, has shed 2,100 points or 12 per cent. Most experts believe things may not improve for a while.
A large number of stocks have already hit 52-week lows, some at all-time lows. Not a market for the faint-hearted, say experts. But, if you have the nerve, there are opportunities. “The markets right now are only meant for those with a high risk appetite. Those who do not have the appetite to lose money should not be entering the markets at this point. The combination of global economic uncertainties and decline in our domestic economy, with policy paralysis from Delhi, is not good,” says Saurabh Mukherjea, head of equities, Ambit Capital.
What we are seeing right now is a bear phase and the markets have not shown any signs of a reversal in its downward trend. Volatility is part and parcel of markets right now, and one should not take a decision in a state of panic, advises Vishal Kapoor, director and head of wealth management, Standard Chartered Bank.
For those already invested, there is no point in mulling over historic losses. Take such corrections as an opportunity to reassess your portfolio and even rebalance it. If you are invested for the long run, every big move is a re-balancing opportunity.
“If there is a steep change in one’s portfolio, you should look to rebalance. Such decisions should not be driven by market movements over one or two days. It is reasonable to review and reasses your portfolio if any asset class has moved by more than 10-15 per cent, and then refresh your portfolio with current options,” says Kapoor.
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WHERE TO GO
Bank fixed deposits and gold have given investors good returns this year. Gold is also known to be a hedge against uncertainty. Gold exchange traded funds are an option investors can consider. Gold funds have given double-digit returns in the past two years. As against the Sensex, which has shed 20 per cent in the past year, gold funds have given returns of 43 per cent.
While selecting stocks or sectors, one has to be very targeted. Volatility may continue, with global uncertainty and news-driven reactions. Stick to defensive stocks, such as health care and fast moving consumer goods. If you have the stomach to take a contrarian bet, look at banking scrips. Once rates start to cool, rate-sensitive sectors such as banking, which have taken a beating in the past year, are likely to benefit the most. But here, too, do not bet on the entire sector. Look at select buys. You can spot these by seeing how much they are undervalued, the cash in the balance sheets and their finances. And, remember to have a long-term time horizon.
C J George, managing director of Geojit BNP Paribas Financial Services, says it would not be right for an investor to exit at this point. In fact, if you have idle cash, invest it in a staggered manner over a long period. You can reap the benefits of cost averaging. This involves doing steady investments through time, much like a systematic investment plan in mutual funds.
“The stock markets are at rather attractive valuations from what they were even two weeks ago. It is typical retail investor behaviour, where one dumps stocks when stock markets tumble and buy when they are on the rise. Instead, they should take such corrections to invest in low-beta stocks and blue chips, in a staggered manner,” says George.