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By DK Aggarwal The domestic stock market is witnessing volatility led by a series of domestic and global events and is also facing a risk ahead of the forthcoming general elections.
The volatility seen in the market will continue at least till the election results are out.
However, the silver lining is that after seeing a selloff for several months, foreign investors have now turned net buyers in February, mainly on account of clarity on government spending post budget, dovish stance taken by the central bank, improving valuations and expected earnings recovery.
Meanwhile, PMI numbers and latest auto numbers seem to be in the recovery mode, which indicates green shoots of recovery.
The recent traction in earnings was improving and was better than the expectation.
On the flip side, the economy is not growing as expected and the recent GDP number for Q3 was at 6.6 per cent against 7.7 per cent in the same quarter last year and 7 per cent in the previous quarter.
It is expected that the weakness in the economy may keep RBI’s stance dovish and supportive.
Moreover, the government seems to have been very optimistic about estimates of direct taxes.
The recent Skymet projection for a normal monsoon in 2019 will continue to boost confidence of market participants as good rains may stimulate the rural economy.
Volatile markets give investors an opportunity to accumulate quality stocks.
The consumer durables story has played out very well and recent auto numbers are signalling positive traction to the automobile sector (two wheelers).
It is expected that these sectors would continue to do well as various government subsidies and schemes targeted to improve rural income levels have started showing positive results.
Consumer durables companies, too, have come up with numerous tailor-made solutions to bring best technologies at best prices.
With a rising middle class with higher disposable incomes along with favourable demographics, the sector is expected to see growth.
On the economy front, the Indian economy is poised to grow at a healthy pace due to its robust fundamentals.
As of now, agriculture, fast-moving consumer goods and auto and auto ancillary sectors are looking quite attractive for long-term investment.
Besides, the BFSI sector has shown remarkable improvement in financial performance and NPAs have begun to recede.
The IT sector, too, has been growing significantly.
The focus should be on the largecap stocks, which have businesses with strong and consistent earnings growth along with cautious and experienced managements.
Also, one should keep 15-20 per cent portfolio in cash to take advantage of good opportunities.
