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Indian markets are down five per cent from record highs and are gyrating in a fixed range. This, experts say, provides an opportunity to investors, especially those who missed last year’s stellar rally, to build long-term portfolios that will generate wealth over the next five years.
Experts believe an earnings revival is two to three quarters away. Deepak Mohini, market strategist and founder-director of Trendwatch, says: “Such a correction phase should be taken as an opportunity. However, investors need to be selective in picking stocks, as not all in this market is worth buying.”
He suggests a systematic investment plan for select stocks, mainly in the large-cap space. “Private banks, pharmaceutical companies and fast moving consumer goods (FMCG) can be looked at. Availability of stocks in the mid-cap space is few, as the segment has run too high. It's worth it to look at large-cap counters,” he adds. Few would disagree that equities invariably beat other asset classes in the long term. Experts say volatility in the stock market should not deter investors. Rather, deep corrections could provide entry points in quality stocks.
Nimesh Shah, managing director of ICICI Prudential AMC, believes the large-cap space offers many opportunities for undervalued stocks. “Several large-cap stocks in sectors like consumer goods, pharmaceuticals and information technology (IT) have corrected significantly in the first half of the current year. A prudent strategy could be to invest in good quality companies whenever there is a valuation gap,” he says. For instance, several large-cap counters in the banking, IT and FMCG spaces have fallen 20-40 per cent and could be worth looking at.
Vetri Subramaniam, chief investment officer (CIO) of Religare Invesco Mutual Fund, says: “Long-term equity returns in India have averaged about 15 per cent (annually) and matches longer-term earnings growth. Investors should invest in the market with this threshold in mind. Further, given the current valuations and a still on-the-mend economy, they should keep a time horizon of five years or more.”
Market experts agree there might be further hiccups in the market if earnings do not improve and the global situation remains uncertain. An investor need not panic but should start selecting stocks.
Sunil Singhania, CIO (equities) at Reliance MF, says: “The current correction has also meant good potential stocks are now available at reasonable valuations for an investor who believes in the India growth story and a long-term horizon.”
He is positive on private banks, selective discretionary themes like automobiles & ancillary, equipment manufacturers, cement, large power companies and select companies within the capital goods space. “Most of these themes or sectors will benefit from economic growth and would also get particular benefit from increased capacity utilisation and lower interest rates,” he adds.
TIME TO PUT MONEY
- Investors need to be selective in picking stocks, as not all in market correction is worth buying, say experts
- Sectors that can be looked at are private banks, pharma companies and FMCG
- Experts suggest a systematic investment plan for select stocks, mainly in the large-cap space
- They also say long-term equity returns in India have averaged about 15% (annually)
