Sharp surge of 650 points in the benchmark Sensex during Friday’s session might have reversed the trend of the stock markets but experts advice retail investors to stay cautious. With markets being dominated by foreign institutional investors (FII), experts warn investors from investing on current levels as they might get trapped on the higher levels.
Ashok Agarwal from Escorts Securities expects markets to start the week on a stronger note but the volatility would remain quite high. He said, “Run up in the stock market was quite swift and was triggered by heavy FII buying. Markets look bullish but retail investors should avoid fresh buying.” While explaining the reason behind heavy FII buying, Agarwal added that the FIIs are expecting an investor friendly climate post BJP comes to power.
As per Agarwal, short term traders should trade in the direction of the market flow but for long term investors, Agarwal advices, “Investors should wait for clarity and avoid rushing into the markets. Since the surge has been steep, we expect markets to correct now and hence investors should completely avoid fresh buying on higher levels.” He further added that long term investors should buy companies with sound fundamentals only after the correction is complete and markets start to stabalise.
Jagdish Thakkar from Fortune Fiscal is expecting the rally to continue until the election results are but also advices retail investors to stay extremely cautious and avoid getting trapped with stocks bought at over priced rates. Calling the current markets expensive, Thakkar said, “Markets have turned quite bullish after the recent rally and we expect this surge to continue till the election results are announced. We even expect markets to touch new record highs.”
But Thakkar warned investors that the rally would be short lived and might be followed by a phase of heavy profit booking. He said, “We are expecting to see sharp profit booking to soon start as indices are quite over priced and institutions who have been investing till now would soon start to pull out.” While trying to formulate a safe strategy for investors, Thakkar said, “Investors should completely avoid buying at current levels. Rather they should use this surge to book profits and then wait for markets to correct before re-investing.”
Kunal Saraogi from Equity Rush advises long term investors to avoid markets but urges short term traders to encash the rally and high volatility of the markets. He said, “Markets are expected to rise a little more while the volatility would continue to stay high until the new Government takes control at the Centre.”
While warning long term investors from investing on currents levels, Saraogi added, “Investors should completely avoid buying now as the markets have already shown a run. We expect the markets to start correcting soon and hence investors should wait for that correction to finish before again thinking of entering the markets again.”
While all analysts are advising investors against buying on higher levels, AK Prabhakar, a senior market analyst expects the rally to carry on for a little more time than just end after election results. He said, “Markets trend has been completely reversed and we expect the rally to continue for the coming days. Markets are anticipating a stable Government and once that happens, we expect markets to surge to new highs.”
As his advice to investors, Prabhakar adds, “Investors should wait for markets to correct a little before buying again in the markets. Investors should buy on dips and avoid buying during an ongoing rally.” When asked which all sectors investors should focus on, Prabhakar said, “As markets would surge, we expect private banking stocks to be the best performers. Also, investors should focus more on capital goods, infrastructure and metal shares as they look good for investment. But, retail investors should completely avoid buying information technology and pharmaceutical stocks as we expect them to underperform due to rupee appreciation in the coming days.