Since the index could witness some consolidation in the near term, investors should use dips to buy into quality stocks, said experts
The first phase of polling begins on April 11 spanning across 20 states and Union Territories. In the first phase, 91 out of 543 Lok Sabha constituencies are going to polls. The counting of all votes will take place on May 23.
Investors on Dalal Street are nervous as selling pressure is visible. The risk of benchmark indices falling is more when they are trading closer to their highs, which is the case currently.
As polling continues, volatility will rise and it makes sense for investors to keep a small portion of their portfolio invested in stocks that are election-safe, stocks that are unlikely to get influenced by political scenario.
History suggests that market volatility remains elevated during polling leading up to counting day.
"Shaking off its range-bound behaviour since January 20, the market shot up sharply after hitting a calendar year low on February 19, fuelled by: 1) strong FPI flows, 2) diminishing political risk perception post “non-military pre-emptive action” against Pakistan-based terrorists, and 3) an easing global liquidity environment. However, market volatility remains elevated as it most often does in the months preceding the General Elections," Elara Capital said in a report.
"As against an average value of 15 in CY18, India VIX has seen an elevation this year, with YTD average of 16.5, and it is currently around 18. We expect the elevated volatility environment to continue in April 2019," the note added.
The outcome of elections will not change the underlying growth of the economy or fundamentals of a company, but the idea is to stay with quality stocks that are likely to fall less in case of an unstable outcome.
“At best, it will be a sentimental and an emotional outcome. But, stock market is not guided by emotions. Strong corporates will keep on making money the way they did and therefore at an aggregate level nothing is going to change,” Umesh Mehta, HoR, SAMCO Securities told Moneycontrol.
“In such a scenario, largecaps would be the safest bet and investors must park their money in stocks such as Hindustan Unilever, Dabur India, Nestle India, Tata Consultancy Services and Infosys to get relatively stable returns pre and post elections,” he said.
Experts also suggest that some stocks or industry houses may have a political lineage which is where the impact could be felt but, in general, investors should keep on buying good quality stocks at every correction.
Since the index could witness some consolidation in the near term, investors should use dips to buy into quality stocks, they said.
“There are select pockets of large/mid/smallcaps, which are attractively valued and could outperform. Hence, investing in a phased manner would be a better approach rather than staying on cash and timing the market,” Jayant Manglik, President, Religare Broking told Moneycontrol.
“We remain constructive on long term-growth prospects of Dabur, Godrej Consumer, Maruti Suzuki India, Crompton Greaves Consumer Electricals and Indraprastha Gas. With high volatility expected ahead of the election outcome, we feel these companies are relatively safe investment picks and offer healthy upside potential in the coming months,” he said.
Pritam Deuskar, Fund Manager at BonanzaPortfolio advises investors to track stocks like Reliance Industries, Axis Bank, DCB Bank which will give good returns whereas HDFC Bank, Britannia Industries, Bajaj Finance will protect capital and rise again more than indices.Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.