Just a week is left before the Reserve Bank of India (RBI) announces its monetary policy review on January 28 and analysts are extremely optimistic that the central bank might finally start the process of reducing key rates. With inflation figures easing down during December, analysts add that now all eyes are going to be fixed on RBI Governor Raghuram Rajan’s stand towards growth.
Another factor, as analysts pointed out, which could support equity markets, would be ongoing quarterly results. The result season has kicked off on a positive note with information technology companies posting strong rise in their business but as far as concern towards rising non performing assets (NPA) of banks are concerned, experts feel with economy reviving, situation of the banking sector would also improve.
Jagdish Thakkar for Fortune Fiscal said, “We think markets would correct a little due to profit booking but eventually expect the equities to rise as hope of rate cut from RBI is quite strong this time. All eyes are now set on the upcoming RBI policy review and with inflation showing signs of easing, RBI has more room to finally reverse this high interest rate regime.”
While advising investors, Thakkar added, “Investors should wait for markets to correct first and once it stabalises, then invest in beaten down stocks. Focus should be more on stocks with sound balance sheets and from the rate sensitive sectors because if RBI reduces rates, rate sensitive stocks would show sharp rises. It is best for investors to avoid information technology (IT) sector for a while and book profits from it.”
Expecting the volatility of the markets to continue, Escorts Security’s Ashok Agarwal said, “As the general elections approach, markets would remain volatile but do not see a sharp fall in markets going ahead in the short term. There have been multiple signs which suggest that going forward economy would start to turnaround and inflation would ease further. So, investors should make the most of this opportunity and buy every time markets fall.”
Advising investors not to pour all their money in one go, Agarwal advises buying in a staggered way. “Accumulate good midcap stocks, which are reporting strong quarterly results. Metals, oil & gas and banking sectors have corrected a lot and from here we expect a bounce back in these sectors. Investors should look for sound companies in these sectors and invest for a medium to longer term. On short term, traders should avoid piling up their losses and exist for stocks which have either rallied earlier or are under pressure due to other reasons.”
Kunal Saraogi from Equity Rush also feels markets would remain very choppy and advise investors to trade with caution. He said, “We are expecting equities to remain volatile but their downside looks limited and do not think indices would report any sharp falls. Best strategy for investors would be to wait for market correction to get over and then buy. Investors should focus more on interest sensitive sectors as now we expect them to start bouncing back after RBI announces rate cuts. Traders should avoid taking huge risks and book profits immediately rather than wait for larger gains.”
RK Global Security’s Rakesh Bansal feels markets are at a very crucial levels and if the correction is limited, then stocks can rally again near to their record highs. He said, “There are plenty of opportunities in the markets for investors as well as short term traders. While investors should remain stock specific, traders should focus more on the flow of markets and try to trade along in the same direction. With RBI policy review fast approaching, there will be a lot of movement in real estate, automobile and banking stocks and traders can encash these opportunities. Investors should focus more on beaten down stocks which strong fundamentals and clear growth plans.”