Backed by heavy foreign inflows, Indian stock markets have again surged to all- time highs but going ahead, experts expect this momentum to wear out. Equity markets have been constantly rising on anticipation of economic reforms by the new Government and as Union Budget fast approaches, market analysts are advising long term investors to avoid buying on higher levels.
Certain that markets would fall sharply atleast once post Budget, Jagdish Thakkar from Fortune Fiscal said, “The current momentum would only last till the Budget post which we are expecting a sharp correction. Markets on the current levels are quite expensive and hence would not be able to sustain on these levels for long.”
Expecting markets to stay buoyant on the short term, Thakker urged long term investors to avoid buying anything on current levels. But for the short term traders, he said, “Traders should look for opportunities in banking, infrastructure and capital goods shares as I expect them to outperform on the short term. Focus more on midcap companies and avoid large caps as they have already shown a strong run up. long term investors on the other hand should wait for markets to correct and buy only on declines.”
In the last month, Sensex has surged by over 3,000 points but going ahead, Ashok Agarwal from Escorts Securities expects this rally to stop. “Markets have surged on pre Budget expectation but I expect it would now soon start to correct. There is a strong possibility of markets falling and this time the correction would be deep before the rally again picks up.
Citing as the only positive sign, Agarwal said that the retail activity has picked up slightly in the last month but markets still remain dominated by foreign institutional investors and thus urged to avoid buying as they can get trapped on these higher levels. “Investors should completely avoid buying right now but if they have to, then they should not take large risks. Investors rather should wait for a deep correction to finsh and then again formulate a new strategy before entering the markets.”
Even though Kunal Saraogi from Equity Rush also expects a sharp correction to start post budget, he urged short term traders to make the most of the rally till then. “Markets have already surged a lot and we do not see a large upside for here in the markets. But this momentum is expected to continue for the coming few days and traders should encash this opportunity.”
When asked what strategy the traders should adopt in the current situation, Saraogi replied, “Short term traders should focus more on high momentum midcap stocks as they would yield better returns. We expect good returns from public sector banks, FMCG companies, two wheeler manufacturers and automobile component makers.”
While most analysts are advising for a defensive approach, AK prabhakar, a senior market analyst holds a different view. Prabhakar said, “I am expecting the momentum to push markets to new highs and Sensex even can touch 26,300 levels soon. The rally would continue till the budget atleast and after that there can be a small correction but overall the mood of the market would remain positive.”
As his advice for the investors, Prabhakar added, “I expect automobile and FMCG shares to surge on back of positive monsoon but investors should focus more on midcap companies rather than the heavyweights. Also, investors do a complete background check of the companies before invest and only buy fundamentally sound shares. Apart from that, I also expect a sharp surge in public sector banks and power shares ahead of the budget.”