Ever since the announcement of the Union Budget during the first week of July, the stock markets have been treading a downward slide. While Sensex closed at 39,908 and Nifty at 11,946 points on July 4, a day ahead of the Budget, they slid down to 38,337 and 11,419 points respectively. This slither started soon after Finance Minister Nirmala Sitharaman’s Budget speech.
Market experts have attributed this fall to a lackluster budget with the surcharge on FPIs acting as trusts to be a mood spoiler. But in such a scenario, what should investors do?
Amit Gupta, CEO and Co-Founder, TradingBells, said that historically, mid-cap and small-cap indices have never given negative returns for two consecutive years, and they have had a dismal 2018. “Assuming they follow the same trend, we can expect good returns in the mid-cap and small-cap sectors in the next 6-12 months. Hence investors may start identifying good quality mid-cap and small-cap stocks for positive returns in the next 6-12 months,” he explained.
Gupta further added that Q1 is likely to remain weak for corporate earnings, but that the markets have already factored in the worst; therefore, anything positive can improve market sentiments.
“Any major steps by the government towards their plan of 5 trillion economy could act as a catalyst for the markets in the coming future. US President Donald Trump may also show some soft stance ahead of elections next year which may lead to a further rally in the global markets,” he adds up.
Mustafa Nadeem, CEO, Epic Research, believes that there are performers in the markets that are continuing to perform despite the market in a range for the last one-year.
“Sectors and specific stocks from these sectors are still doing good like Pvt banks, IT, Consumer Nondurable, and Energy. Investors should for sure look at stocks with decent (Two digits) CAGR, Good earnings and good management. These small thumb-rules will continue to make money in a bull market,” confirmed Nadeem.
He further added that the market has been in an uptrend for the last few years and hence there can be exhaustion at some point in time where there may be some consolidation or correction.
“But these minor corrections are an opportunity. So at this point, market needs to lose weak money. Let it drain out. Let there be a decent correction, maybe 10% or so. Valuations may become cheap and we may see some smart money entering again,” Nadeem remembers to send across a subtle caveat.
Gupta adds that easy global liquidity, rate cut expectations from RBI and higher infrastructure spending by government are the key positive triggers for the market in the near term.