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Last Updated : Mar 07, 2018 12:15 PM IST | Source: Moneycontrol.com

Time to invest? Top 10 ‘safe stocks’ to buy after the 3000-point fall in Sensex

With the market correction of past 10 days, the stock prices of some of these PSUs have seen rough treatment, resulting in the possibility of healthy dividend yields, said the Centrum report.

Kshitij Anand @kshanand

The S&P BSE Sensex has plunged over 3,000 points from its record high of 36,443 hit on January 29, 2018, but there were plenty of stocks which managed to outperform the index by a wide margin.

The nervousness in the market is emanating from both global as well as domestic factors, but investors with a long-term horizon should not get scared with the correction. Indian market is still in a bull run and dips should be used to dip into quality stocks.

In the short term, global cues and their impact on liquidity will make Indian market volatile. But, back home strong long-term fundamentals of India, and liquidity support from domestic institutional investors are likely to cushion the fall if any.

“India has gone into a double whammy under the domestic and global headwinds. After a setback from Union Budget, the domestic market has shifted focus into the global volatility which is turning cautious due to premium valuation, increase in interest rate and risk of de-globalisation,” Vinod Nair, Head of Research at Geojit Financial Services told Moneycontrol.

“The right strategy would be to churn your portfolio towards defensive sectors and reducing high beta stocks should be the key of the retail investors,” he said. In the short-term market may have a positive bias, during which the investors should consider to shift the portfolio into low beta.

Talking of stocks which can weather all storm are Dividend Yielding stocks. In the current economy, where bank fixed deposits offer interest rates to the tune of 6-7 percent, there are stocks which are giving dividend yields similar to that.

“Further, the interest on bank fixed deposits is taxable whereas the dividend from equity is completely exempt from tax (except when the dividend income in a financial year exceeds Rs.1 Mn),” Centrum Wealth Research said in a report.

“In that context, post-tax dividend yields of some of the stocks are way higher than the post-tax interest yield on bank fixed deposits. So, investors can consider some of the high dividend yield stocks to bring in regular inflows,” it said.

Based on the historical evidence, PSUs have been high dividend payers to address the fiscal deficit of the government to balance the tax collection shortfalls.

Some of the stocks such as Coal India have seen huge dividend payouts over the years. The fourth quarter of the financial year traditionally provides maximum activity in terms of PSU dividends.

Further, there was a huge drop in dividend payment by RBI to the government for its financial year ending June 30, 2017, owing to disinvestment at Rs 30,659 crore as against dividend of Rs 65,876 crore in the previous year. So, there may be dividend catch-up needed from other profit-making PSUs.

With the market correction of past 10 days, the stock prices of some of these PSUs have seen rough treatment, resulting in the possibility of healthy dividend yields, said the Centrum report.

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First Published on Mar 7, 2018 12:11 pm
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