Even though Nikhil Murali’s total stock portfolio has eroded by close to 15%; but there are a few scrips in his kitty that have given him considerable gains in 2011. He is lucky stocks like Bata and Jubilant Foodworks (among others) have helped him offset losses.
That is, the Sensex and BSE-500 fell 24% and 28% last year. But both Bata and Jubilant have gone up 46% and 20%, respectively. Murali is wondering if he should book profits in these scrips and maybe buy into a few stocks that are now trading at very low valuations.
The good part is that even in the most beaten down sectors, there have been select stocks that have given not just given positive returns but considerable ones at that.
Out of the Business Standard 200 stocks, 25 scrips have given positive returns last year. This list includes Bajaj Auto, which has gone up more than three% last year (BSE Auto index was down close to ten%), Power Grid was up close to two% (BSE Power is down more than 32%) and Hexaware was up 28% (BSE IT is down 12%).
So what should be your strategy if you own some of these scrips that have outperformed the broader markets and have given positive returns? Those that have gained from holding some defensive stocks can continue to hold on to them.
Prateek Pant, Head of Products & Service of RBS Private Bank says that one should hold on to defensive stocks considering the prevailing uncertainties in global and domestic economic environment.
"With the upcoming key events in the developed world as well outcome of local state elections, we expect to see some good opportunities in risk assets which one could use to build positions to benefit from long term structural growth at very attractive multiples. With interest rate cycle reversal around the corner, one could evaluate positions in interest rate sensitive sectors such as banking. ”, advises Pant.
Market advisors say that it is just not the best time to shift from stocks that have done well to those that are beaten down and are likely to see an uptick this year. Capital preservation is the key at the moment. Stocks that have given good returns last year are those which have generated good numbers and will continue to do so in this year. So hold on to them.
“This is not the right time to shift. Once there is more clarity from Europe and once the rate cuts do start to happen here then the risk taking appetite of investors is likely to return. This will take another three to four months to happen. Those counters that have been profitable in 2011, when the markets were down, will continue to be profitable this year too”, says Pankaj Pandey, head of research at ICICI Direct.
However, if you are of the view that stock has run its course and it cannot go up any further and might slowdown from here on, then you can book profits and invest in those scrips that are available at cheaper valuations.
“It depends on what call that you are going to take on the stock. If you are of the view that the stock is richly valued and that, say, the impending rate cut or the depreciating rupee is likely to have a negative impact on the scrip then it is best to exit with profits and look for better bargains”, says Arnav Pandya, a certified financial planner.
