The markets have had a very good run over the last few months. They touched all-time highs and are in a consolidation phase. The market undertone is quite strong and there is healthy buying at every small correction. Analysts believe the investors' risk appetite has gone up due to the strong bull run in the markets.
The major factors to track include the movement of foreign institutional investor (FII) flows, price rise in commodities - especially crude oil, and any negative developments on the global front. Investors should identify favourably-placed sectors in the current economic conditions and stick to the strategy of 'buy and accumulate on dips'. You should stagger your actions (buying or selling stocks) by trading in small quantities at regular intervals to get a good average price.
These are some of the major factors one should keep in mind while investing:
For those who have already invested
Those who invested at lower price levels with a short to medium-term horizon should book part profits and hold the remaining positions with a tight stop-loss trigger. Currently, the markets have run-up quite a bit and a technical correction is long due.
However, on the other hand, strong inflows from FIIs can take the markets to further highs. Therefore, a strategy of booking part profits and remaining partially invested is a good strategy to reduce risk.
Long-term investors should remain invested as the medium to long-term outlook is quite good. Domestic companies and economy are doing quite well and the soft monetary policy in developed markets will drive further flows into emerging markets. However, it is recommended to make a periodic review of the portfolio based on the current macroeconomic and business conditions, and quarterly results. Investors should take the necessary steps for adjustments in their portfolios based on the macroeconomic conditions and company results.
For those planning to invest now
Investors looking at entering the markets should remain careful and invest their risk capital only in equity. A decision to invest in the markets should not be taken in a hurry simply because they have given very good returns over the last few months. It is important to go stock-specific and understand the logic of investing in a particular stock before entering the markets.
Since the markets have run-up quite significantly over the last few of months, it is advisable for investors entering now to keep cash positions handy and wait for a correction to take fresh positions in identified stocks. Since it is not possible to time investment in the market, it is advisable to stagger the investments by buying in smaller lots at regular intervals during corrections.
Strategies for IPOs
The primary market is attracting interest due to the good listing gains registered by some recent initial public offerings (IPOs). It is important to note that all IPOs and follow-on public offers (FPOs) do not list with high gains. Therefore, it is important to make a study of the objectives of the IPO, company fundamentals and expert advice before applying for an IPO.
Another important factor to study is the subscription pattern of the IPO. Keen interest from institutional investors is one of the indicators that the issue has good support from large institutions which can result in listing gains. On the other hand, you should also tap the market grapevine as it gives signals on the issue pricing.
