Retail investors must avoid going gung-ho and avoid entering the stock market at high valuations, and should wait for a correction, industry experts said as the benchmark BSE Sensex jumped 2.4% on Friday.
“Retail investors should ideally sell when markets are moving up and buy when markets are going down but somehow they (investors) tend to do exactly the opposite,” said SP Tulsian, an independent analyst. “Even at current levels, there are certain stocks that have good basics and are trading much below their all-time high, investors can buy such stocks.”
Industry experts say that if retail investors have booked profit on any stock above 5% in the last two-months or so due to the Friday’s jump; they should exit such stocks if they have a short-term perspective."IT, pharma and FMCG (fast-moving consumer goods) are stocks that were stable even when the markets were weak and so when other sectors like real estate and oil jump, they would take a back seat. But this does not mean investors should start dumping these stocks but hold on to them," said Tulsian.
For retail investors who are looking at a long-term perspective of more than two years, it is still a good time to invest. But the sectors and stocks selected should strictly be based on price to earning ratios and fundamentals of the company.
“There are some companies which have good fundamentals but are still trading nowhere close to their 52-week high, investors could pick these stocks even at these levels. These stocks would give good returns in 2-3 years,” said Sunil Jain, vice-president, equity research, Nirmal Bang.
Analysts say that retail investors can take a call on metals stock if they have a short-term outlook of around 2-3 months.
Retail investors should wait till the market corrects to 5,200 levels if they want to invest in stocks that are nearing their all time high.