Be selective... - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks


Login Failure
(Please do not use this option on a public machine)
  Sign Up | Forgot Password?  

Be selective...

May 10, 2004

It's not just the politicians that are suffering the political fever. Investors too have been witnessing the heat on the bourses over the last three weeks with every election phase throwing up a tide turning political equation, at least that's what the market volatility indicates. The chart below shows how have the indices have behaved before and after each election phase. And looking at this, it can be concluded that indeed, polls do (make one) tic.

Let us look at the market behaviour during the poll season. The indices witnessed weakness a couple of days before the first phase of elections, even overshadowing the robust March quarter corporate numbers. However, investors re-entered the markets on the back of a favourable scenario for the ruling coalition that emerged from the first exit poll results, as it signified the continuation of the current pace of reforms being seen in the country. However, markets received a big jolt post the second phase of elections, which saw the political equations pointing towards a hung parliament. This sent the indices in a dizzy as the benchmark indices crashed almost 4% in a single day on across the board selling. While we are trying to justify market reactions, what we are highlighting is the volatility.

Then, while the markets were trying to find a footing, the derivatives settlement and disappointing results by FMCG major, Hinistan Unilever (HLL), took further toll in the last couple of days in April. However, it was the opinion polls on May 4, which indicated a favourable position for the ruling government post the third phase of elections that made the indices once again move into forward gear.

However, at this point, taking cues from global developments like strengthening crude prices, the already weakening commodity cycle, the risk of rising interest rates in key economies and the final phase of elections due on Tuesday (May 10), investors opted to take some money off the table on Friday last week.

Investors must note that stock market behavior, like the one being witnessed in recent times, is largely a temporary phenomenon and merely the act of opportunists at work. These tend to take advantage of investor sentiments, which are, unfortunately, influenced more by rumours than fundamentals, to make a quick buck.

In these volatile times, retail investors should exercise caution and stagger their investment decision over a period of time. Timing the market may not be a wise move in these times. Though the long-term prospects of the economy are strong, it is wise to be selective when it comes to stock selection. If investors do not have the stock selection skill, it is better to invest in a credible mutual fund through a systematic investment plan. Always, look at the downside before the upside.

Equitymaster requests your view! Post a comment on "Be selective...". Click here!


More Views on News

How Much Money Should an Investor Set Aside for Trading? (Fast Profits Daily)

Sep 21, 2020

In this video, I'll give you a simple equation which you can use to decide how much money you can set aside for trading.

Kotak Standard Multicap Fund: Strategizing Growth with Focused Approach (Outside View)

Sep 21, 2020

PersonalFN's analysis on the features and performance of Kotak Standard Multicap Fund.

Sensex Can Go to 25,000 Before it Goes to 60,000. Are You Prepared? (Profit Hunter)

Sep 21, 2020

Am I expecting a big crack in the Sensex and what next?

What Do the Charts Say About Buying Smallcaps Now? (Fast Profits Daily)

Sep 18, 2020

Everyone seems to be excited about buying smallcaps now...but is it the right thing to do? What do the charts tell us? Find out in this video...

Sundaram Bluechip Fund: Will Hold the Stable Horses (Outside View)

Sep 18, 2020

PersonalFn briefly outlines the newly launched NFO note HSBC Corporate Bond Fund.

More Views on News

Most Popular

How the 8-Year Cycle Can Help Identify Multibaggers (Fast Profits Daily)

Sep 11, 2020

This is how you can apply the greed and fear cycle in the market to pick stocks.

Why am I Recommending Caution? (Fast Profits Daily)

Sep 9, 2020

This is why I have changed my short-term view on the market.

Why We Picked This Small-cap Stock for Our Hidden Treasure Subscribers (Profit Hunter)

Sep 17, 2020

This leading household brand will profit big time in a post covid world.

This Could Be the Best September for Auto Stocks (Profit Hunter)

Sep 11, 2020

Here's why I think this month could be a great for auto stocks.


Covid-19 Proof
Multibagger Stocks

Covid19 Proof Multibaggers
Get this special report, authored by Equitymaster's top analysts now!
We will never sell or rent your email id.
Please read our Terms


Sep 21, 2020 (Close)