The euphoria on Monday turned to panic on Tuesday as the NDA coalition fell way short of the emphatic performance that the exit polls had forecast. Investors, who had anticipated a strong victory for the ruling party, found themselves caught off guard as the actual election results painted a different picture.
The Nifty ended the day at 21,884.50, down 1,379 points after touching a low of 21,281 during the day. The Sensex tumbled 4,389 points to finish at 72,079.05, after having hit 70,234 intra-day.The India VIX surged by 31%, reaching 31.71 before settling at 26.7475, highlighting increased volatility and market fluctuations in response to the election results. This spike in volatility suggests that traders and investors should brace for continued turbulence.
What should investors do?
Buy only when the market is deeply oversold
We believe Indian equities will go into a bear market and will fall by more than 20% by April 2025. Hence, investors should buy only when the market is deeply oversold and that too for the short term to medium term only,” said Amit Goel, Co-Founder & Chief Global Strategist, Pace 360.
With anticipated waves of buying and selling over the next year, timing will be crucial. Goel has urged investors to enter the market when selling pressures seem to ease and exit when buying momentum wanes.
Furthermore, sectors previously favored by the market may see a shift in focus due to potential changes in government priorities. It’s anticipated that consumer-based stocks will garner attention as the government aims to address urban and rural distress.
Be cautious about power, capital goods, real estate, and industrials
Temporary halt in investment and manufacturing related themes is anticipated
As a result of the election outcome, Merisis Wealth anticipates a temporary halt in investment and manufacturing-related themes that had garnered excessive investor attention in recent years. Sectors such as Capital Goods, Industrials, Defense, and PSUs, which had enjoyed significant investor interest, are now expected to undergo a period of valuation adjustment.
“Given the outcome of 2024 elections, we believe there could be a temporary pause on several investment and manufacturing related themes that had become excessively popular with investors in the past couple of years such as Capital Goods, Industrials, Defense and PSUs, which incidentally are trading at their highest point in their valuation bands in more than a decade and investors digest the handsome returns that these pockets have particularly enjoyed in the past few years.
As such there is a high likelihood of derating of valuation multiples that is likely to kick in but at a broader market level we believe money will rotate out of some of these themes, that have particularly been heavily reliant on government policy making and support and into sectors that are more neutral such as IT, Consumption, Healthcare, Autos, Chemicals and Telecom,” said Ruchir Kapoor, Managing Director, Merisis Wealth
Balanced portfolio approach
To navigate through this period of uncertainty, Merisis Multicap adopts a balanced portfolio approach, akin to the famous 4-2-4 soccer formation. The portfolio includes a mix of high beta stocks across various sectors, balanced by low-volatility options in Telecom, Pharmaceuticals, and IT. Additionally, the portfolio maintains a significant exposure to the precious metals theme, providing diversification and stability in volatile market conditions.
How to navigate the market volatility?
Amidst optimism and changing market conditions, maintaining a balanced outlook and focusing on individual company analysis is crucial. While new trends may emerge, thoroughly assessing companies’ growth prospects and valuations is key.
“By pinpointing specific growth catalysts and seeking growth at a reasonable price, investors can navigate market volatility and position their portfolios for long-term success, despite short-term fluctuations. Key sectors such as agriculture, textiles, automobiles, information technology (IT), and financial services offer promising investment prospects in India, driven by factors like domestic demand, global competitiveness, and technological advancements,” said Vinnaayak Mehta, Founder, The Infinity Group, an investment advisory firm.
First Published: Jun 04 2024 | 4:47 PM IST
