As uncertainties prevail and a revival expected only post second quarter of 2009, looking at current stock market situation it will pay to buy stocks of large cap companies with a proven track record, high earnings visibility, low leverage, good book value and low debt. Buying stocks with strong promoter holdings looking at recent Satyam fiasco could be one one of the considerations for stock buying.
Stock trades at cheap brokerage fees and buying stocks online or online stock trading have made trading stocks very frequent practice for normal investor, they should understnad that stocks mentioned here are for long term investing and will be fruitful if they hold for longer time durations.
In the aftermath of economic slowdown and fall in markets, and also uncertainty over the next few quarters, it is advisable to play safe and practice stock buying of large companies with a consistent track-record. Stock trades are best to be avoided for retail investor. Online stock trading have made it very easy for retail investors to trade stocks very frequently. It is complete no-no in current stock market situation.
Sandeep Shenoy, strategist, Pinc Research says, “Companies with integrated operations, strong balance sheets, low leverage or ability to complete financial closure for capex, and low working capital requirements are preferred.”
Beyond that, interest rate sensitive sectors are finding favour. Says Srivastava, “We are favourably inclined towards rate-sensitive sectors like banking, auto or even in real-estate on a selective basis. But, as the market is expected to be range bound, a trading strategy could prove helpful.”
Defensive plays like FMCG and utilities, too, figure among the preferred lot even as there is already some amount of premium built in their valuations, due to the stability they provide. Additionally, users of commodities are expected to outperform. Says Manish Sonthalia, senior VP Research & Strategy, Motilal Oswal Securities, “Now, the consumption side, like auto (two wheelers) will get more importance. Among other preferred sectors are FMCG and telecom.” Commodity user industries like construction, which may get a fillip on account of increased infrastructure spending, also figure in the list, although there are some issues pertaining to funding of projects.