Most investors want to play safe in turbulent times, yet expect reasonable returns on investments. Below is the list of five themes to help you come out unscathed
DARE to bare your wisdom in the current market situation? You better shelve the idea if you have the faintest clue of the factors behind the negative sentiment. In fact, over the last six months, weak global market cues, skyrocketing commodity prices, particularly crude oil, high inflation, suspense over signing of the nuclear deal and political uncertainty have all cast a pall of gloom over the markets and made even the best laid-out investment plans go awry. And if you are a first time investor, this can’t be a more inappropriate time.
All, however, is not lost yet. Out five investment themes which may help you to beat the market blues over the next six months.
DEFENSIVE POSITIONING
No investor likes a range-bound, highly volatile market, marked by spikes and falls at regular intervals. And if you believe industry analysts, there is no let-off in the second half as well. They hold the view that bears and bulls will continue to punch each other to gain supremacy in the capital markets over the next six months, and losing the bout, probably, will be you — the investor. Thus, it is better to go for a defensive positioning. If you wish to dabble in the stock markets, then better buy defensive sector stocks — FMCG, pharma, healthcare and information technology.
You should opt for large-cap blue-chip liquid stocks, as in a tough macro economic environment, these stocks can withstand pressures. The focus should be to identify stocks in this space which are quoting at attractive valuations, without trying to time the market.
STAY WITH CASH
If you think you don’t belong to the first category, are cautious about your investments but still you want to get the best out of the equity markets, then you should better spend the next six months piling up cash. Over the near term, markets will remain volatile due to multiple factors such as policy responses to rising inflation ahead of national elections, absence of FII flows until the global scenario improves and earnings growth moderation. Further, growing strains amongst the ruling coalition pose additional uncertainty for the markets. In this scenario, analysts think it won’t be a bad idea to stay with cash, which you can accumulate to your advantage in the long-term, particularly till the market stabilises after the general elections.
CAPITAL PROTECTION
If the first two themes don’t excite you, and you are an investor who wants to enjoy the best of both equity and debt markets, then you should opt for structured products with capital protection. The advantage of investing in a capital protection product is that it allows participation in the stock markets without the accompanying worries of capital erosion. Typically, capital protection funds invest up to 20% in equity. Thus, not only your portfolio benefits from a reduced credit and interest rate risks, but also gains from the current high yields. In a nutshell, it acts as a hedge against a difficult market situation.
VALUE INVESTING
If you are an aggressive investor, then probably your investment outlook should be to do value picking in the stock markets. In the current market scenario, analysts believe that quality stocks across sectors will clock relatively good performance as investor focus returns to fundamentals. You should slip into the contrarian investing style, buying stocks that are currently trading below their net asset values. The recent volatility in the markets has thrown up attractive opportunities. Stock prices of various front liners at the current level seem to have already factored in lower growth prospects and look attractive.
Financial and engineering stocks are a good bet in the short-term, considering they have undergone sharp falls during the last few months. The banking sell off is overdone, and this sector remains a strong growth sector.
SYSTEMATIC ROUTE
Last but not the least, your investment theme should be one which includes a disciplined approach to investing. Markets are expected to be cyclical and in such a scenario, analysts recommend that either you can reduce the risk of equities by increasing your holding period or invest regularly through systematic investment plans (SIPs). It is advisable to avoid momentum and concentrated bets in a range bound market. The advantage with systematic plans is that it helps to average out your investments to the ups and downs of the equity market.
DARE to bare your wisdom in the current market situation? You better shelve the idea if you have the faintest clue of the factors behind the negative sentiment. In fact, over the last six months, weak global market cues, skyrocketing commodity prices, particularly crude oil, high inflation, suspense over signing of the nuclear deal and political uncertainty have all cast a pall of gloom over the markets and made even the best laid-out investment plans go awry. And if you are a first time investor, this can’t be a more inappropriate time.
All, however, is not lost yet. Out five investment themes which may help you to beat the market blues over the next six months.
DEFENSIVE POSITIONING
No investor likes a range-bound, highly volatile market, marked by spikes and falls at regular intervals. And if you believe industry analysts, there is no let-off in the second half as well. They hold the view that bears and bulls will continue to punch each other to gain supremacy in the capital markets over the next six months, and losing the bout, probably, will be you — the investor. Thus, it is better to go for a defensive positioning. If you wish to dabble in the stock markets, then better buy defensive sector stocks — FMCG, pharma, healthcare and information technology.
You should opt for large-cap blue-chip liquid stocks, as in a tough macro economic environment, these stocks can withstand pressures. The focus should be to identify stocks in this space which are quoting at attractive valuations, without trying to time the market.
STAY WITH CASH
If you think you don’t belong to the first category, are cautious about your investments but still you want to get the best out of the equity markets, then you should better spend the next six months piling up cash. Over the near term, markets will remain volatile due to multiple factors such as policy responses to rising inflation ahead of national elections, absence of FII flows until the global scenario improves and earnings growth moderation. Further, growing strains amongst the ruling coalition pose additional uncertainty for the markets. In this scenario, analysts think it won’t be a bad idea to stay with cash, which you can accumulate to your advantage in the long-term, particularly till the market stabilises after the general elections.
CAPITAL PROTECTION
If the first two themes don’t excite you, and you are an investor who wants to enjoy the best of both equity and debt markets, then you should opt for structured products with capital protection. The advantage of investing in a capital protection product is that it allows participation in the stock markets without the accompanying worries of capital erosion. Typically, capital protection funds invest up to 20% in equity. Thus, not only your portfolio benefits from a reduced credit and interest rate risks, but also gains from the current high yields. In a nutshell, it acts as a hedge against a difficult market situation.
VALUE INVESTING
If you are an aggressive investor, then probably your investment outlook should be to do value picking in the stock markets. In the current market scenario, analysts believe that quality stocks across sectors will clock relatively good performance as investor focus returns to fundamentals. You should slip into the contrarian investing style, buying stocks that are currently trading below their net asset values. The recent volatility in the markets has thrown up attractive opportunities. Stock prices of various front liners at the current level seem to have already factored in lower growth prospects and look attractive.
Financial and engineering stocks are a good bet in the short-term, considering they have undergone sharp falls during the last few months. The banking sell off is overdone, and this sector remains a strong growth sector.
SYSTEMATIC ROUTE
Last but not the least, your investment theme should be one which includes a disciplined approach to investing. Markets are expected to be cyclical and in such a scenario, analysts recommend that either you can reduce the risk of equities by increasing your holding period or invest regularly through systematic investment plans (SIPs). It is advisable to avoid momentum and concentrated bets in a range bound market. The advantage with systematic plans is that it helps to average out your investments to the ups and downs of the equity market.
