Stock Market Crash: Don't jump to buy, let the dust settle and let it play out, Rahul Arora's advice to investors

Investors unloaded their long positions at 22,000-22,500 levels on the Nifty, as the index fell through various technical support levels.

Sailing through the carnage witnessed in the stock market on June 4, Rahul Arora, the Chief Executive Officer of Nirmal Bang Institutional Equities, advised investors against bottom fishing in today's trade.

"Wait, don't jump into buying today. There will be opportunities, but for today, let the dust settle, let it play out," Arora advised investors in an interaction with Moneycontrol.

Arora acknowledged that the BJP-led NDA's struggle to cross the 300-mark, a tally much lower than what exit polls predicted, came as a setback for the market. However, he also attributed the intense profit booking seen in trade to exuberant valuations in several pockets across the market.

"Much of the PSU re-rating in the past year is attributed to the government's focus on indigenization and PLI schemes. However, except for PSU banks, the balance sheets of other PSUs lack the strength to justify their valuations," Arora noted.

Meanwhile, he anticipates market focus to shift towards defensive sectors like FMCG and pharma in the short term, particularly after the election did not align with market expectations.

Once the dust settles, Arora recommends compiling a portfolio comprising FMCG, pharma, and some information technology stocks over a three-month period.

Also Read | Share Market Crash: Nifty PSE down 19%, trading halted in key shares as trends show weaker majority for NDA

"Even within the three, I think it'd be better to be heavy on FMCG and pharma. FMCG was one of the best-performing sectors in the latest earnings season, combined with projections of a normal monsoon, rural recovery picking pace, and easing inflation," Arora highlighted.

Aside from this, Arora also recommended investors to refrain from investing in illiquid small cap stocks in their hunger for multibagger returns.

"I always advice people to invest in stocks that are liquid. Don't invest in tips. Don't invest on news because on days like these, if you've put your money in an illiquid small cap stock, there will be no takers when the stock price falls down, the impact cost of which is significant," Arora added.

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.