investment strategy: Sensex after 60,000: Where to invest your money?
Are you tempted to book profits or stay put and enjoy the ride to the market?
These are such simple questions; unfortunately there are no simple answers. Having said that, if we take a look at all of the fixes that have happened over the past year and a half, looking back they’ve always bought opportunities. Of course Friday was not a correcting day except the intraday part opened higher and corrected slightly during the day, but it is a very difficult call. The answer to this will have to come from two perspectives; one is the traders’ point of view – they will have to look at their goals and keep making profits and taking new positions whenever they want.
For long-term investors, the answer will come from asset allocation. If the weighting of stocks as an asset class has exceeded their allotted weight, then it is time for them to recognize profits so that their risk profile remains under control because otherwise we cannot find any other logical reason to arrive at the answer. whether one should book profit or not. We’ve had a one-sided rally for the last and a half years. It doesn’t look like in the near future we can see any strong fixes.
But that said, we want to know where do you need to relax a bit and where do you need to deploy more money?
Beyond the reallocation of asset class weightings, if we focus specifically on equities, we will have to look at the stocks or sectors that have risen sharply over the period of one year, one and a half and a half years. In my opinion, in metals, it is high time that at least a part of the profit is recorded even if we do not want to come out completely. It is therefore an area for reserving clear benefits, in part if not in full.
In terms of reallocating that weight or taking additional exposure with market participation, if one is to continue to take exposure, then capital goods are something that, given the way investments are likely to pick up in the economy largely on the government side, quite a part on the private side as well.
So, capital goods, infrastructure – all space can be looked at. Real estate has become a new area of ââinterest for investors due to the sudden demand. We know how employment has grown and how wages have increased, especially in the IT industry. Coupled with this, in the area of ââfintech and all other related areas, this impact will extend to other areas as well. Real estate is therefore an area where new allocations can be made depending on the evolution of the market. If one wishes to take a slightly contraindicated long-term call, then certain opportunities in the automotive sector can be considered.
We have seen this theme of latecomers playing catch-up. Even a stock like ITC has started to move, but if you look at the lagging sectors that have now started to come back, be it metals or telecoms, how would you play with this theme?
Historically, there are two ways for latecomers to move around or participate or react in the market. One is short-term participation. Every time the market keeps going up one way and the money keeps coming in. We have a sector rotation which continues to take the indices to new heights. When the market sees that almost every imaginary and reasonably liquid sector has advanced, where does the new money go? The fresh money temporarily goes to the lagging sector. It is therefore a way for latecomers to react.
The other way is a reasonably medium-term countercurrent appeal that can be taken. Latecomers must return at some point. As long as we think they are going to come back in terms of growth, in terms of participation in the economy, once can take a medium term call.
So just to differentiate, let’s say I’m still not sure whether multiplexes can be a counter bet or not and whether or not they will participate in the reasonably foreseeable future or not. First of all there is no opening for the moment; then no opening at full capacity; even if it does, the audience will start to come back. So it is one. As I said. we can look at a counter bet, but in my opinion, it is not a counter appeal, it is a call that must be taken at the right time.
Automobiles are something where at some point we will see the demand come back. The companies are good, the listed players are financially good. Almost all of them have zero debt and strong balance sheets. As demand returns, they will participate. So these are the two ways that laggards participate, a short term move due to the market continuing to move up but not what I was referring to, a reasonable mid term approach is something that can give yields.
How would you approach metals? They’ve been very volatile lately and that’s because of the Evergrande litter?
I can’t afford to follow the movement of commodity prices because the world price movements affect the Indian price movement, then depending on that demand, the demand changes. The government keeps changing import duties and anti-dumping duties based on lobbying and damage to the national economy. Stock prices move a lot in advance. So I don’t really have the chance to get my hands on it, but it is certainly time to reserve at least part of the profits in the metallurgical sector.