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Stay invested for 3-4 years to reap long-term gains, advise experts

business Updated: May 13, 2014 23:39 IST
Ashwin Punnen
Ashwin Punnen
Hindustan Times
Small investors

Small investors should stay away from stocks right now. But long-term investors, who don’t panic when the stock market tanks, could see substantial gains over the next three-to-four years.

“The exit polls have been more positive than expected. After 30 years, it seems, there will be a fairly decisive mandate (in a general election),” said Rashesh Shah, chairman and CEO, Edelweiss, a large financial services firm.

“If Modi wins, the Sensex could rise another 2,000 points, but it’s not sustainable. A correction is bound to come,” said Parag Parikh, chairman, Financial Advisory Services.

“But a slight swing (in the results) on the negative side (read: the NDA not winning) may lead to a short-term irrational downturn (in share prices),” added Shah.

However, the long-term prospects of the Indian economy remain bright. So investors who don’t panic and sell out when their shares fall could see substantial gains over the next three-to-four years. “If the government takes positive steps on the economy, we could be in for a medium to long-term bull market,” said A Balasubramanian, CEO, Birla Sun Life AMC.

Rally spreads to mid and small caps

Ashwin Punnen
Mumbai: The rally in the stock markets is now spreading beyond the 30 large-cap BSE Sensex stocks to mid-cap and small-cap stocks as well.

The BSE Mid-cap Index was up 1.44%, while the BSE Small-cap Index was up 1.71% on Tuesday.

With the exit polls indicating a clear majority for a Narendra Modi-led NDA government, investors are betting on companies that will benefit from strong policy actions that are going to be taken by the new government.

Experts expect the mid-cap rally to extend further as the economy bounces back and take further cues from policies likely to be introduced by the new government. “There is now action in the mid and small cap sectors, but retail investors are exiting the market as they have already witnessed their stocks appreciate,” said Deena Mehta, managing director, Asit C Mehta & Co, a leading brokerage firm.

The investor focus is now shifting from defensive stocks like IT and pharma to cyclical and more growth-oriented stocks, especially in sectors like power, banking, infrastructure and also public sector companies.

Over the past five trading days, the BSE Power Index rose 11.2%, BSE PSU Index rose 9.09%, BSE Capital Goods Index 8.9%, while BSE Banking Index 9.2% and Oil and Gas Index 8.97%. And BSE Sensex has gained 6% during this period.

IT and pharma shares have underperformed the Sensex. The BSE Healthcare Index is down 2.3%, while BSE IT index is up just 2% during this period.

Heavyweights like Reliance Industries, State Bank of India and BHEL have led the rally so far but the rally is now becoming more broad-based.