What investors should do to stay afloat

With key equity indices losing almost 40 per cent from the peak, it’s time now for investors to add some fundamentally good stocks to their portfolios, writes Vyas Mohan. See graphics

The ongoing meltdown in equity markets is a boon for investors who missed out on the four-year-long phenomenal bull run that began in 2003 and ended in January 2008. With key equity indices losing almost 40 per cent from the peak, it’s time now for investors to add some fundamentally good stocks to their portfolios, experts say.

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The Sensex closed on Monday at 12,596 points – that is, 40 per cent lower from an all-time high close of 20,873 points recorded on January 8, 2008.

“As the saying goes, it always makes sense to buy during the time of maximum pessimism,” said Sukumar Rajah, CIO, Franklin Templeton Investments India.

In a market that is embedded with apprehension, the idea is to pick up shares of companies that are the least susceptible to economic downturns. In other words, buy shares of companies whose products will be in demand irrespective of the economic buoyancy.

“Investors should look to buy shares of companies that are into agriculture and allied activities like water management,” said Hansal Thackker, director, Lalkar Securities. “These are promising sectors as their businesses will always be in demand.”

However, it may not be a good idea to invest all your funds at one go, as volatility is high in this market and further downside is expected. According to a BNP Paribas Securities report released on Monday, Asian markets could slide 20 per cent lower, while Indian markets could go down by a further 30 per cent.

Thus, market experts advise investors to utilise their funds in parts and start buying fundamentally good stocks. “Investing through the systematic route is the best way to deal with market volatility and benefit from it,” said Rajah. “While the recent crisis could prove to be cathartic for the global financial system over the long term, there is no clarity if the worst is over.”

Banking stocks in India got battered after the credit market crisis in the US saw heavy selling in shares of lenders. At 6,175 points on Monday, the BSE Bankex is not even at the half-way mark of its January 2008 level.