Stock markets have been swinging like a pendulum between continuous buying from foreign institutional investors (FII) and heavy profit booking from domestic traders. Experts expect this trend to continue and feel that the retail investors would feel the maximum burns from this volatility in equities.
With the fear of an early tapering of stimulus by the US Federal Reserve reducing and foreign inflows again pouring in, Indian stocks markets have again started a fresh rally. But analysts expect this rally to be short lived and are advising retail investors to be extremely cautious while buying stocks.
Jagdish Thakkar from Fortune Fiscal says, “Markets have bounced back after a short correction and we expect this rally to continue for some more time but since there are no strong fundamental triggers, markets won’t be able to sustain on higher levels and will soon start falling. Investors should be stock specific and avoid taking big risks. Bank, automobile and capital goods shares look promising but investors should be very careful in picking shares.”
While Jagdish feels there are a few sectors which would perform, he advises for profit booking in sectors which till now have led the rally. “If investors are holding shares from infrastructure and pharmaceutical sector, they should book profits as these sectors have already performed and now we expect them to correct.”
Ashok Agarwal from Escorts Securities also feels that markets would continue to rise for some time but also warns investors for tough conditions in the short term. He said, “We do not advise long term investors to buy in the current scenario. The market is for short term traders who should use every rally as an opportunity to sell in the markets. We feel equity indices would continue to remain volatile for the next six to nine months and those who wish to invest should be willing to give atleast three years time to their investments. Investors should only buy when the markets correct and can focus on interest sensitive sectors but it is best to buy shares of companies which have strong fundamentals.”
In a FII dominated market, Kunal Saraogi from Equity Rush feels, investors should wait for the volatility to settle down before doing any long term investments. He said, “Investments should be stock specific and investors should be very careful while buying. The best strategy in the current situation would be to book profits whenever possible and then wait for markets to correct before re entering. long term investor should wait and watch for market volatility to fall and show signs of consolidation before investing.”
While most analysts feel market rally could continue a little more, RK Global Security’s Rakesh Bansal explains this rally just a short term bounce back and expects the correction to continue. He said, “Markets have rallied to their all-time highs in short span of two months. After such swift and enormous run up, they appear to be witnessing correction. As of now it’s very difficult to assume that ongoing correction has come to an end.”
He further added, “Investors should not blindly believe that markets would rally to higher levels as we are expecting markets might witness more correction before it begins a new rally.”