If you have not been making money in the stock markets even as the Nifty hits new highs, it’s because your portfolio is missing the key ingredient – quality large caps.
While the BSE Sensex and the Nifty on high-speed propellers surging to new highs every day even as they chart new seas crossing 37359 and 11280 points respectively, not all stocks are doing the victory lap in the market.
Consider this, even as the Nifty hits new highs, the bellwether has gained 6.5 percent in the last one month as investors continue to pour money into the large-cap stocks. That’s a pretty solid gain in just a month.
But remember that markets have warmed up to domestic flows. In the coming months, the headlines could continue to read as Nifty hits new highs. So in the coming months, you should not miss the boat, but instead make the good days count – and use strategies such as these to develop a winners edge.
WHERE TO TRAIN YOUR GUNS
It may seem counter-intuitive, but this rise is thin-based as ever. In the BSE 500, just about 10 percent of the stocks are close to their 52-week highs. A few stocks closest to their 52-week highs are Infosys, Tata Elxsi, Pfizer, HDFC, InfoEdge, Relaxo Footwears, VIP Industries, IndusInd Bank, Bharat Financial Inclusion, Exide Industries among others.
On the contrary, more than 50 percent of the BSE Sensex stocks are trading at about less than 15 percent of their 52-week lows.
So, when it comes to investing money in the markets at the peaks, many investors fail to do the right thing. But some of the savviest people let their winners run the course, and even add a few more when the market corrects. So, as the Nifty hits new highs, train your guns on large caps largely.
KEEP A QUALITY-LARGE CAP BIAS
Of course, it is not easy to know how your investment will perform, but by and large a portfolio of some high-flying names at the core should work out well in the long run.
A big reason why some of the large-companies are being favoured in this market is that they are expected to be big beneficiaries of the formalization of the Indian economy, where the large companies are only expected to consolidate their position. Second, the liquidity from across SIPs, which is seeing inflows of over Rs 7300 crore a month, is largely in large-cap funds. So this should be a no-brainer.
DIP AND SIP INTO ETFS
With the frontline indices looking well-place, ETFs could be a better option in the current market with their lower costs – and simple philosophy that mimics the index to the dot. ETFs are low-cost investments and are based on indices. So, if you are in an ETF that reflects the large indices, your returns should have been pretty good in the market.
With the stock market running up at a furious pace, though, you should look at deploying money on the dips, rather than going all out on the index. So, whenever there is a minor correction in stocks of 3-5 percent on the index, you could do a deep dive in index funds.
REVIEW AND REJIG
For most investors, the profits of the current wins may sway your emotions into thinking that the markets are going to be like this. Sure, there seems to be a new enthusiasm in the market, but that should not make you get carried away.
If you are a new investor, you could be easily swayed into thinking that the trade you made was a masterstroke. Remember, the markets move from one theme to another. Right now, it is quality large-caps that are making a run.
But when the valuations hits the roof (they are already lofty at over 26 times PE on the Nifty), the market will quickly look for other stories. Even in large-caps that you may be buying, you may have to hold on to a stock for a long time, or you may miss the opportunity to make a fast profit. Don’t think too much about these events, instead focus on keeping losses to a minimum in a bull market, but holding on and buying-down on dips.
If your stocks are not doing well, re-jig your portfolios to the winners. This market is rewarding companies that are showing faster than average growth rates. Don’t miss this Nifty hits new highs moments.
