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Market experts: What to buy, sell and hold now?

Last updated on: June 18, 2008 17:51 IST
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The Indian stock markets have been on a rollercoaster ride since January. After hitting an all-time high in January the 30-stock BSE Sensex has fallen down sharply and is currently trading between 14,800 to 15,800 levels. Between the current levels and January highs a lot many traders as well as investors must have burnt their fingers trying to dabble in stocks.

While some may have bought stocks at the highest level, others could contemplate buying more of the same stock. New investors may be sitting on the fence on when to enter the market.

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To clear this confusion a wee bit, Prasanna D Zore spoke to three market experts: Ambareesh Baliga, vice president, Karvy Stock Broking; Dipan Mehta, member, Bombay Stock Exchange; and S P Tulsian, investment advisor. Here's their advice to young investors:

Ambareesh Baliga (We spoke with him on June 16 post market hours)

Where are the markets headed now?

I think the markets will be range bound. Downside is limited from here: The Nifty may not go below 4450 to 4500. At the same time we don't see the Nifty crossing 4700 to 4800 levels in a hurry. We expect the market to consolidate in the next two weeks.

In such uncertainty what should investors do: Buy/hold/ sell?

I think investors should hold and buy at lower levels. They should normally buy on days when there are major dips. Suppose if the Nifty goes to 4600 levels and then drops a 100 points then that should be a day to buy.

What would you be buying on such days?

We are buying across all sectors except realty. The reason we are avoiding realty is clearly because property prices are headed south. It doesn't make sense buying realty stocks at this point in time. Perhaps we will get the same realty stocks at lower levels by November-December.

Real estate prices are expected to correct by 15 to 18 per cent in the next six months. Apart from realty we are buying across as they are available cheaply at current levels. Be it banking, capital goods, and mid-cap stocks in the IT sector investors can buy.

From the Sensex investors can pick Larsen & Toubro and BHEL.

What would be your advice to young investors?

This bunch of investors should preferably invest via the mutual fund route or should buy only frontline blue chip stocks.

Any Sensex levels for December 2008?

The Sensex should be around the 19000 to 20000 level. Earlier we were looking at the 21000 to 22,000 mark but now looking at the way things are we have scaled it down. Given a six month to one year investment horizon we are reasonably bullish on the Indian stock market.

Dipan Mehta (We spoke with him on June 16 post market hours)

Where are the markets headed amidst this global turmoil?

In line with the global markets our markets have also become stable at this point in time. The only threat now is of the crude oil prices spiking up again. If they do then it could have a damaging effect on our markets. For the time being the selling has stopped and there is calm but we are still not out of the woods and would like to see a sharp and sustained correction in the prices of crude.

Apart from crude prices I don't see any other threats to our markets. Of course, the sub prime crisis and US economy will continue to linger in the background.

In such uncertainty what should investors do: Buy/hold/sell?

Investors should be looking at re-juggling their portfolios and the strategy should obviously be to move towards good quality stocks.

Mainly interest–rate sensitive stocks from sectors like automobiles, real estate, to an extent some of the banking shares having a rich price to earnings ratio, infrastructure companies which are not doing projects by themselves. On the other hand, one should look into getting into pharmaceutical and software space where this is more of a secular growth story.

While it is difficult to say what kind of upside these two sectors will provide but it can be safe to assume that they will outperform the markets if one invests with a 12-month investment objective.

What would be your advice to young investors?

Young investors should get into a different approach to investing and develop a strategy to gradually increase their exposure to equity. The best way to do this would be to invest via mutual funds and their systematic investment programmes.

Do you see stock market falling by another 10 to 15 per cent from correct levels?

It all depends on the prices of crude oil. If oil prices go above $150 a barrel and sustain above that level then perhaps we could even see a 10 to 15 per cent fall.

S P Tulsian, Investment advisor (We spoke with him on June 17 after the markets opened)

What's your take on the current stock market scenario?

Everything is linked to crude prices. If crude prices continue to remain in the $130 to $135 per barrel mark, the markets will continue to remain in the range of 15k to 16k. If, by any chance, crude prices spike to $150 per barrel that is again being speculated by the market, then we can even see 14k level on the Sensex.

Alternatively, if crude softens to about $120 per barrel then the Sensex can climb to 16.5k to 17k. Though I am not an expert on crude oil my sense is that prices may not sustain above $150 even if they cross that level in the near future.

What would be your advice to young investors?

Though there is no clear visibility for the next one year the downside is pretty limited from the current levels. But if someone has an investment horizon of one-year plus then this is definitely a time to make an investment into the market.

Young investors can invest in all frontline stocks. They can always churn their portfolio and get rid of non-performers. However, if you own quality stocks then there is no need to worry. The only thing is you need to increase your investment horizon considering the current state of our markets.

Any stocks that you would recommend?

Reliance Industries, L&T, GMR Infra; amongst private sector banking stocks it could be Dhanlakshmi Bank, Bank of Rajasthan and maybe JP Associate at the current levels.

However, I am cautious on the cement, paper, fertiliser and automobile sector. I wouldn't be recommending these sectors now. As far as the real estate sector is concerned it has corrected a lot and I don't see them falling more from current levels.

My value picks in the real estate sector would be pure property plays like DLF and Parsvnath developers and those like Bombay Dyeing, Century Textiles.

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