As Nifty falls below 16,000, should you buy on dip? What experts think
Stock market experts find it difficult to make any guess about the market bottom but suggest that investors wanting to buy the dip can devise a strategy and keep on accumulating in this weak market. They have also advised positional investors to look at sectors like oil and power, FMCG, auto, banking and real estate on expectations of outperforming other sectors in pull back rally.
Speaking on the stock market strategy for positional buyers in current scenario, Santosh Meena, Head of Research at Swastika Investmart Ltd said, "This market is not meant for the faint-hearted as further fall is possible and there will be no respite on the volatility front in the short term. Investors especially the ones that have entered during the post covid bull market, have to taper down their expectations and need to work hard to achieve a reasonable reason."
He went on to add that the current dip provides a good opportunity to add stocks and India is currently in a better position in terms of economic strength compared to its peers in the medium to long term.
On what should be the ideal investment strategy for an investor looking for buy on dip opportunity, Saurabh Jain, Vice President — Research at SMC Global Securities said, "Nifty 50 index has tumbled around 14.50 per cent from its highs of 18,604 levels and speculations are high about the market making its bottom in near term. However, it would be difficult to know exactly where and when the market would make make its bottom. So, one should invest 40 per cent of the surplus amount at current levels and keep on investing the rest in two parts after the fall of 7 per cent from now onwards."
On stocks to buy today, Saurabh Jain of SMC said that positional investors who want to invest for long term can look at sectors like oil and power, FMCG, auto, banking and real estate. In oil and power, stocks like Reliance, NTPC, NHPC and Power Grid looks strong whereas ICICI Bank and SBI in banking, Varun Beverages and ITC in FMCG, Maruti Suzuki in auto while DLF and Prestige Estates Projects in real estate can be a good bet for positional investors looking to buy stocks in weak markets.
Unveiling the thumb rule that a smart investor usually following while buying on dips, Santosh Meena of Swastika Investmart listed out the following rules:
1] Buy for the long term: Control over our emotions especially greed and fear is necessary, having a short-term mentality is dangerous as investors might get stuck in fundamentally poor stocks or at a very high price. Investing for the long term has two advantages, first, you can take advantage of the power of compounding, and second, you can sleep peacefully.
"Investors must perform due diligence before investing and invest in those stocks where they have a complete understanding about the underlying fundamentals. One must study the business model, management quality, competitive landscape, financials, and future growth prospects, before investing in any stock. This will help them to separate the wheat from the chaff. This is a basic requirement before investing otherwise mutual fund route is more appropriate," said Santosh Meena.
2] Understand risks: Good investors never commit money into an investment without total awareness of the risks (and potential rewards) involved. By doing so, they assume full responsibility for the fluctuations that may ensue during the investment life cycle.
3] Enter into quality names: The current scenario, where the environment is full of uncertainty and negative sentiments is the best time to add stocks that have good fundamentals, growth visibility, competitive advantages, and reasonable valuations.
4] Experts' advice: Smart investors don’t shy away from professional advice. This has to be distinguished from the occasional tips and suggestions from your friends and family. That is not professional advice. Seek help from a qualified market professional in making your portfolio relevant to your goals.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.