FIIs to hit pause, markets to stabilise, no need to recalibrate portfolio just yet, says Samir Arora

Even as PSU stocks took a beating with Nifty PSE index falling up to 15 percent, Samir Arora advised investors not to make drastic changes to their portfolios based on the election results

As Nifty, Sensex tanked over 8 percent, Samir Arora of Helios Capital said that that the market's reaction to the early leads from the ongoing vote tally was not unexpected. He noted that the market had already factored in the possibility of a BJP-led government.

While exit poll signalled a thumping majority with over 370 seats, counting so far is pointing towards a number below 300. The actual outcome did not significantly change the market's trajectory, according to Arora.

The benchmark indices soared up to 3 percent on Monday following exit poll numbers and slumped up to 8 percent today due to the lower-than-expected seat count for the BJP, which led to a brief sell-off. However, Arora believed that this reaction is short-lived and that the market would soon stabilize.

The expert told Moneycontrol that foreign institutional investors (FIIs) would pause their selling for some time, but eventually, they would return to the market.

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Arora believes that FIIs would not significantly alter their investment strategies based on the election outcome, as the policies of the new government would not be drastically different if it is a BJP government with Narendra Modi as the PM for the third time.

He pointed out that the market would continue to be driven by fundamentals and that FIIs would eventually return to their long-term investment strategies.

Even as PSU stocks took a beating with Nifty PSE index falling up to 15 percent, Arora advised investors not to make drastic changes to their portfolios based on the election results as long as BJP retains power and Modi is the Prime Minister.

"If you have 35 stocks in your portfolio, you have to recalibrate just five stocks depending on how the result unfolds to be ready for the new environment, said Arora. Some PSUs like State Bank of India need not be touched as financial sector outlook is bullish and oil, power PSUs look good as well," he added.

For PSUs that have delivered 200-400 percent return in a short span, investors can consider reducing exposure while picking up other PSU stocks that are available at attractive value.

Also Read | Election impact may keep markets fluid for some days but no threat to corporate profits: Raamdeo Agrawal

The founder of Helios Capital said that the market would continue to be volatile in the short term but would eventually stabilize. He believes that the market may end the month down 6 percent but would recover by the end of the year.

He also expressed optimism about the long-term prospects of the Indian market, stating that it could potentially double in the next five years.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.