Is the current volatility in the markets unsettling you? Are you wondering whether you should invest in stocks at all? Volatile markets call for a bit of circumspection. Read on for smart tips that will help you make the right investment decisions.
Volatility is a fact of life in the stock markets. Emerging markets such as ours, with more at stake and less stability, tend to fluctuate more easily when compared with established markets. They sway often due to smaller issues because emotions run high. This, of course, is part of the excitement that gets you to invest in these markets.
So, what do you do in the face of so much volatility? Do you cut and run; or rough it out? What stocks can you invest in, in times of uncertainty? Remember that volatility makes no difference to the long-term investor. So, if you have long positions in your portfolio, forget the index today and go back to the sports pages of your newspaper. However, volatility does perk up your life if you prefer to turn over your portfolio regularly.
The volatility today is due to a rising Rupee impacting IT company wage bills, performance and results, the governmental dithering on the nuclear deal, the SEBI’s new guidelines for P-notes and fears of the sub-prime credit contagion revisiting the markets.
The big four IT firms have slowed down compared to previous years, the nuclear issue has undermined the stability of the government, and Citibank has reportedly taken a hit of over $15 billion from mortgage related losses. Some FIIs have withdrawn from the markets.
So, where should your money go? Invest in solid areas such as engineering capital goods, Crompton Greaves, for example; commodities, especially copper; infrastructure firms such as Lanco and banks such as Vijaya and Yes Bank. Check out the seriously oversubscribed IPOs and watch new developments like the Mundhra Port.
Do you stay the course or do you exit? Never get out in a hurry. Volatility is not a market crash. This phase will pass, just like several others before this one.
Is volatility a sign of an immature market? Do you think that the Indian stock market is too uneven? Do you have suggestions to improve this?
