'Going by Buffett's philosophy, investors should buy midcaps for more than 10 years'

Trend following indicators such as Super Trend and MACD continue to show a sell signal in the absence of any positive triggers. This is not just a pure play of the election results, as the global cues also continue to haunt all major markets around the world.

Long-term investors should not churn their portfolio at this stage as foreign investors continue to pull money from the Indian markets. This is the time to wait and watch and let the tide settle before raising the sails again.

Q: Does it make sense to invest in beaten-down midcaps if someone is looking at a time horizon of five years or so?

A: Being a follower of Warren Buffett, I always believe the time horizon one should look at while investing in stocks (especially midcap stocks), should be a minimum of 10 years, with the regular portfolio checks in place.

In his words, “If you aren’t willing to own a stock for 10 years, don’t even think about owning it for 10 minutes.” Every largecap today was a midcap at some point, and there are various value picks available in the midcaps currently, especially in the financial services sector such as AU Small Finance Bank and RBL Bank.

Every investor must have a portfolio comprised of at least 30-50 percent invested in midcaps depending on risk appetite.

Q: Do you think the equity market is pricing an adverse outcome in the upcoming election results?

A: There has been increased uncertainty with respect to the results of the general elections, which is exactly what the markets don’t like.

At the same time, worsening US-China trade relations and mixed March quarter results have not helped the market sentiments. Heavy selling was seen especially in the energy, telecom, metal, oil & gas and power sectors during the past week.

Oil prices rose 1 percent since May 9 owing to a surprise fall in US crude stockpiles, despite concerns over the escalating trade battle between the US and China.

So it is not just the upcoming election results which are driving the markets, but the global cues have also been weak and un-supportive.

Q: Given that FIIs have withdrawn nearly Rs 2,800 crore from Indian equity markets in May, how do you see their strategy? 

A: The main reason that can be attributed to FIIs pulling out money from the Indian markets since the beginning of May would be uncertainty around election results.

The domestic markets have taken a beating which is no different to other major stock markets across the globe. Once the results are out, there should be more positive FII activity especially if there is a clear majority for any one political party.

However, in case of a coalition government, this trend could continue for a few more sessions before we can see investments coming again from the FIIs.

Q: Considerable selling was seen in oil & gas and metals. Should investors avoid these two sectors as of now?

A: Infrastructure sectors have seen heavy selling which also includes the telecom and metal sectors. At the same time, mixed results in consumer sectors such as FMCG, paints, and automobiles have kept the cautious investor away.

There is some positive investment flowing into gold which has been historically considered to be the safe haven for investors during adverse market conditions.

Gold prices have been steadily inching towards Rs 33,000 mark (per 10gm) and $1,290 mark (per ounce) in the international market.

The cautious investor should stay away from the infrastructure and consumer sectors and wait for the right moment before investing again.

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