Be Shrewd with your Portfolio and Keep Faith
The Indian markets are once again touching new highs and are amongst the world’s best performers! FPIs have been net buyers in August after being net sellers in July. This is auguring well for the Indian markets, especially after FPIs have been selling in other EMs. DIIs have been consistent buyers in the markets since March 2021 too. However, the market direction continues to remain wobbly with the near-term outlook appearing stretched as there is a fear of rate increase, rich equity valuations and rising corona virus cases in the western world. Also, there is concern regarding the quantitative easing being tapered by the Federal Reserve that will most likely lead to outflows by the FPIs.
On the other hand, the Indian government is not leaving any stone unturned to ensure that the markets remain vibrant and positive. The recent announcement by the government to raise Rs 6 lakh crore from sale of brown-field assets is also in line of creating liquidity to wade through the current pandemic-driven tough economic cycle. The present scenario along with increased volatility in the near term may call for a change in the way one needs to participate in the markets. One of the most popular ways to participate in volatile markets is through options.
Options can be your greatest ally in volatile markets with a plethora of advantages in such market conditions. Nevertheless, options trading needs to be an educated exercise. In our cover story we have explained how by adopting the best option trading practices one can consistently look forward to making money in the markets. The cover story throws light on some of the most important aspects that one needs to focus on while trading in options. The most popular trading strategies are explained in detail and we hope this adds a new dimension in your investing strategy.
Meanwhile, the high beta scrips have also taken a beating lately. People have already become sceptical of a bear market lingering around and are searching for evidence of the same. In one of our special stories we have explained in detail what a bear market is and what we have learned from such bear hugs in the past. The special story also provides insights on which stocks may have already slipped into the bear market phase. One can take cues from this story and the embedded message to construct a portfolio in the current market situation.
In our other special story, we have discussed in detail the prospects of the chemical sector while also highlighting why the sector has been able to do well in terms of growth and profitability. In our earlier editorial we had cautioned our readers of not pursuing the broad-based market and stick to relatively larger caps. Readers who heeded this advice have done well to avoid the small-cap and mid-cap weakness that has been seen in recent weeks.
Going forward, continue to adopt this strategy and boldly exit the speculative bets that have gone wrong and still appear in your portfolio. Do not act on the contrary i.e. end up buying poor quality stocks just because there is a liquidity-driven rally in the broader markets. The risk-on rally tends to spur investors to chase prices rather than focus on fundamentals. Be aware of this. If we look beyond the current short-term anxious moments, the long-term prospects of the market continue to appear encouraging. Hence, keep faith and have patience.
RAJESH V PADODE
Managing Director & Editor