Buy on Dips for Now
In the midst of the ongoing economic and health gloom, the Sensex has delivered 18 per cent return in the very first quarter of this financial year. This is the highest return across all quarters over the past 10 years! Sounds unbelievable and yet it’s true. All our readers who heeded our advice and staggered investments over the past three months are now enjoying the fruits of reaping a rewarding harvest. Now, the biggest question that is uppermost in the minds of investors is whether it is still a good time to buy fresh equities or whether this is the moment to take profits off the table.
In our opinion, the way the market is positioned and the possibility of virus infections increasing in number looming large, some correction does seem eminent. However, over the past few months our central bank, for the first time, launched a ‘quantitative easing’ program to buy government bonds. Such supporting initiatives and the amount of liquidity thereof to cushion the faltering economy are working in favour of the bulls.
Also, the present risk-on approach is pushing the stock prices higher and making valuations uncomfortable at Sensex levels of over 35000. In fact, if we consider the performance of penny stocks from the March 23 levels to date i.e. June 30, we find that the average return delivered by 475 penny stocks is an impressive 94 per cent. While it sounds good to the ears, the very fact that penny stocks are doing well also clearly indicates that investors are getting a little complacent about their investments. And that is something we would clearly ask our readers to refrain from in the present circumstances.
The latest concern or rather a hidden opportunity for the markets is emerging from the India- China border. There are a lot of theories doing the rounds on how India would benefit once it starts getting ‘aatmanirbhar’ and reduces its dependence on China. Our cover story in this issue analyses the self-dependent initiative adopted by the Government of India and forewarns about sectors that are vulnerable to the increasingly volatile situation between India and China. We would like to hear our readers’ views too regarding this development. Do write back to us.
Our special story on the NBFC sector deciphers the sudden rise in NBFC stocks in June after having been one of the major victims of the March market fallout. Travel and tourism is another sector that has taken a major brunt during these pandemic times. Our other special story captures all the interesting aspects affecting the prospects of this sector.
By the time our next issue comes out, we believe we will have a better grip on the gravity of the pandemic to take a stand on market direction. Until then our advice would be to go slow and buy on dips. The turmoil from various corners continues to weigh heavy on economic progress while the recent market run has already taken away a lot of potential gains for now. Hence, buy on dips for now and stay tuned for further insights.
RAJESH V PADODE
Managing Director & Editor