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Way forward for investor when market is mounting new highs

Way forward for investor when market is mounting new highs
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By CNBCTV18.com Contributor Jul 30, 2021 9:43:38 AM IST (Published)

An investor must define his horizon if he is a short-term investor/trader or he is here for the long term. Unless the horizon is clear, investment in all investment classes is speculation.

The financial plan for 2021 was billed as one that would spur development. As such, it made significant optimism in the market and the Sensex performed as needs are. With the market touching new highs and rallying up, it is vital to understand what exactly is fuelling the market.

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An increase in foreign inflows has fueled a record rally in Indian benchmark indices. The overall positive sentiments prevailing in the global market remained strong, which was reflected in the performance of the domestic markets as well. The rise in vaccination prompted market exuberance and government support and interventions in markets promoted economic fairness, all of which combined fueled the market and lead it to new heights.
Investors have to be cautious about the next steps and need to decide what has to be done for wealth protection and wealth creation for the long term.
An investor must define his horizon if he is a short-term investor/trader or he is here for the long term. Unless the horizon is clear, investment in all investment classes is speculation.
Price versus value
With the markets aiming to touch new heights and keeping in consideration the uncertainty, one must take a call on the holdings the investor is holding. Price is important for short-term traders but for long-term players value unlocking is the goal.
Realizing that the lockdown measures may hurt stock market movement and economic recovery, it wouldn’t be a bad idea to book a few benefits on investments and ventures that have accomplished their targeted growth.
There are many sectors and stocks that are trading cheap in valuation because of the pandemic and currently lost the charm due to lockdown. Identifying those gems and investing in those stocks would be rewarding
Timing versus time
If the horizons of the investor are clear he will see the market from that perspective. For a short-term trader timing the market is more important and for a long-term investor giving time to market is more important.
Blue-chip stocks are the stocks of notable, top-notch organizations that are pioneers in their enterprises. These organizations have stood the trial of time and acquired the admiration of their clients and their investors. Few blue-chip stocks which are now the most desired stocks are Reliance Industries Limited, Tata Consultancy Services Limited, Hindustan Unilever Limited, Infosys, Asian Paint HDFC Bank etc.
News versus wisdom
It is always better to take an informed decision, backed by data. I often meet investors/traders who invest only on the parameters of some market information. Some of the sectors that are fancy these days are pharma, health care, metals and chemical industries. I see a lot of players trading / investing in these companies, though they don’t understand the premises of such recommendations. This will help them taking a known risk.
Sharing quick notes on the above sectors for better understanding. Since the occurrence of the global pandemic, healthcare is the most focused key area, which makes investing in the Pharma sector highly profitable. Steel can offer a good investment option this year because of the PLI scheme, which will also help domestic companies enhance their manufacturing abilities and encourage them to develop new products. The chemical sector has rallied significantly in recent years, making it one of the most lucrative sectors to invest in. Realizing that the market has been volatile since the pandemic, it is important to understand the nature of stocks before investing in them. It is always suggested that the investor should be hands-on with the stocks they want to invest in.
Tip versus SIP
For retail investors where one does not find time to do his homework and do the research himself and relies on TIPS of unknown/known person, it is better to invest using the SIP module. Investing in mutual funds through SIPs as opposed to investing in lump sum ways have a variety of benefits such as, unlike stock market investment in SIP is disciplined and systematic, it is highly convenient and flexible, irrespective of how the market is performing SIP provides you with the advantage of averaging out your costs. Thus, investing in mutual funds via SIP could prove to be the best way for your regular investments.
Trading versus Investing
At a time when the market is aiming for the heights, it is the need of the hour to set and prioritize your investment goals. Research and decide what your main goal is and once you’ve set your objectives, figuring out what choices are most likely to get you desired outcomes. Buying and selling right is extremely important for momentum players and buying for right and giving time is important for the long term is the focus. There are lots of good investment opportunities even when the markets are so high. The investor needs to define his investment goals clearly and for the long investor, stocks are still a good option but you need to find those gems with the right amount of research.
The author, Nitin Shahi, is Executive Director at Findoc Financial Services Group. The views expressed are personal
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