Nifty at 16100 Time to Buy the dip selectively and hold longs
Nifty has been correcting and has been consolidating for the past 7 months now. So at 18500, we were the only people to tell you to get onto cash and now we are the only people who are telling you to deploy cash back into the market. But first, let us look at the past situations where wars have broken out and market reaction to the same.
Valuations are very attractive selectively
It is very clear from past instances that after an initial fall world stock markets in past have continued to rally. Further, Nifty PE is at historically undervalued levels and has a massive scope to grow once the conflict is over and this is because there is massive underlying economic growth and recovery that is happening as of now. This will keep pushing the trailing PE lower with every quarter passing by. The growth that is being seen is at unprecedented levels and all leading indicators are showing massive uptick some are showing the best signs in the past 10-12 years.
Crude Oil Outlook
The immediate worry for India is Crude Oil inflation however my view on the same is that Govt will reduce excise duties on petrol partially and hence the rise at the pump will be much lower than what is being anticipated. This can be done now because of higher GST collections which were missing so from a practical standpoint there will be a slight increase in prices at the pump level however they are not expected to be significantly higher to dent economic recovery or push inflation significantly higher in the near term. Besides this Crude oil is at a massive resistance. Have a look at the chart below.
BUY stocks where earnings growth has been and is expected to be robust
There are many stocks now where earnings growth is superb, valuations are very attractive and the growth outlook remains very stable. On every dip look to buy and hold those stocks with a view of 6 M plus and money will be made. The only question remains how much money will be made. Our estimate is that our set of stocks will delivery 50% returns + from current levels in the next few months. So if you do have an outlook for 12 Months plus you should buy the dips however keep in mind buying anything and everything will not make money so only be in those set of stocks where the growth outlook remains stable. We like some names in banks, capital goods, and even some in sugar where we see massive upside opportunities and very limited downside risk.
To know what to buy, when to buy, and how much to buy you can just start a trading account with me and I will be guiding you through. The game will be very stock specific and though small and mid-caps have corrected a lot it will be prudent to stick to the high-quality names rather than trying to buy low-quality companies.
Nifty has good support and the overall structure is showing massively oversold signals. Combining both and with major index heavy weights at supports, we see Nifty will hold these levels, and buying in panic days and holding (buying only high quality) will make excellent money over time.
So finally What’s the game plan?
While we will be on the lookout for further buying in panics, we believe that in the long term the markets will be strong as economic growth and all my leading indicators are showing excellent and strong recovery. This is the time to hold on to the conviction for the long term and not be bogged down by short-term noise.
In our portfolios, front line Banking, niche Metals, mining, and green energy allocations have increased recently and you’d see that we have shifted to large caps.
Here are our general recommendations:
Sectors to look at - Banks, Energy, and Metals
Focus on high quality, large-cap stocks and smallcase given
book gold and buy equities
Stagger buying instead of lumpsum, buy into panics