Managing Market Volatality Intelligently

Current market conditions are very volatile for investors in equity market! Whether they have invested directly in stock market, or indirectly invested in the market through Mutual Funds, both asset classes are receiving a lot of jolts in the market! I am getting panicking calls from many investors! Let me make some pointers.

I take this opportunity to convey my view on how to handle such volatile market conditions. Some of the bigtime value investors like Warren Buffet, Rakesh Junjunwala, Poriju Veliyath & others have taught us many lessons from their pattern of investing. Let’s learn the lessons from their investment pattern.

1) Accept the reality: Market volatility is the reality in any growing economy & volatility is a part of a growing index. An average of 5% correction, once in two months, is quite normal. This can be followed by a 20% correction everyone and half years. This is the average statistics observed. When such corrections happen, the media over reacts & gives a hype for a normal event of the market, creating a buzz in the economy! This creates a panic in the mindsets of the investor!??

2) Investors should welcome volatility: Volatility is an opportunity for investors to make their portfolio to shine well by making the necessary additions & deletions in their portfolio. This active management of their portfolio will give better performance of their folio.

3) Learn to ignore short term market conditions & economic forecasts: As the larger picture of the economy is strong with many macros level strong indicators showcasing the growth of the economy, the short-term forecasts should be ignored by investors.

4) Don’t try to time the market: Don’t even try to time the market by thinking of buying or entering the market in dips, as very often such moves can happen. Enter into right stocks at the right time using technicals & stay put with your portfolio in your convinced ideas on investment. This is the only way to create wealth.?

5) Invest systematically: Investing systematically helps you to get rupee cost averaging, enabling buying more shares during dips & lesser shares when the cost is high. You may even consider a stock systematic investment plan to be a perfectionist in making periodic, systematic investment.

6) Identifying the bigger contributors for the economy is the key: Power of compounding works perfectly well in a good long-term investment. Identifying long term, growth-oriented stocks with strong fundamentals, good management, entering the same stocks at the right entry levels using technical analysis & strong valuation – This is the best way to accumulate wealth from the stock market.

7) Don’t look at short term gratification: No investment works well on a short-term basis. Power of compounding will never come in a short-term investment. Investors see the short-term performance of the market & think that they should have entered the market five years back. Thinking retrospective doesn’t work. Investors choose to buy after the prices have gone up & sell after the prices have come down. They want to buy stocks which have given good performance in recent period & sell the not so good performing ones in the recent past. Don’t be very optimistic or pessimistic, rather try to be knowledgeable about the market.

8) Good business models: What wins in the long term is good business models, durable businesses, honest managers strong competitive moats, reasonable growth factors, good return on capital, purchasing them in a disciplined fashion are the best vehicles for long term wealth creation. Moving in & out of asset classes, stocks, funds & investment style quite often will only give you unsatisfactory long-term results.

Having discussed all these factors, I am herewith giving some good stocks worth considering now due to the recent technical corrections & govt policies favouring specific stocks:

1)???Ethanol Blending – 20% petrol to be replaced:

a) Praj Industries

b) Triveni Engg

c) Balrampur Chini

d) Dhampur Sugar

e) Dwarikesh Sugar

2)Drone import ban – Boost for local manufacturer:

a) Paras Defence

b) HAL

c) Zen Technologies

d) Infoedge

e) DCM Shriram

3) Defence - 25% budget for local manufacturer:

a) HAL

b) LT

c) Bharat Forge

d) BEL

e) Adani Ent

4) Power and energy reforms by Govt:

a) Adani Power

b) Adani Transmission

c) CESE

d) Tata Power

e) IEX

5) Electric vehicle policies:

a) Reliance

b) TVS

c) IOC

d) M&M

e) Tata Power

f) LTTS

g) Exide & Amaraja

6) Housing plan – 48,000 cr, beneficial stocks:

a) DLF

b) CanFin Homes

c) Ultratech

d) HDFC

e) Godrej Properties

7) Local manufacturing boost – Appliances:

a) Dixion

b) Amber

c) Crompton

d) Havells

e) Whirlpool

f) Bajaj Electric

8) Clean Energy Push:

1) Tata Power

2) Sterling & Wilson

3) JSW Energy

4) Inox Wind

5) Adani Green

6) Borosil

The above strategy is one of the investing strategies to enter stocks when we have favourable govt policy towards s specific sector. Happy investing!

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