Mr.Narendra Modi won. BJP got clear majority and would form a new stable government in India. What next ? What does this mean for you as an investor ? Can you stay invested in stocks and mutual funds or do you need to exit from stock market now ? Stock market gained 1000 points on election results day, but finally ended up only 200 points up. Does this mean we expect any market correction in next few days?
What analysts are predicting?
There are only two possible scenarios what Analysts are predicting now. With stable Government in India, Stock market Sensex can reach 26K or 28K or 30K by end of 2014. Some predict that we would see market correction now before we see market reaching new highs.
Also Read: What should you do when stock market is falling?
Why stock market could see new highs by the end of 2014?
The new Government would frame new policies, guidelines and correct all earlier guidelines which were unfavour to the growth of the Indian economy. Such decisions could be done in the next 3 to 6 months time and any such decision which impacts the growth of India could be seen in stock market growth too. Markets have been waiting for a “positive surprise”. There were no such positive surprises in the last 3 to 4 years. Nifty gave less returns compared to a fixed income securities in last few years. New Government is expected to bring several positive things, hence markets would react positively.
Why stock market cannot see new highs before the end of 2014?
Any new policies framed by the Government would be implemented immediately, but the results would be seen only after 1 to 3 years time frame. Hence we cannot say that stock markets react positively to all decisions of the new Government. It may wait for the results before it responds. Currently stock market moved from 18K Sensex to 24K which is 35% growth. Some analysts predict that Stock market may take correction before reaching new highs in 2014.
Well, all this is fine, I am an investor, what should I do now?
I have the following suggestions. These suggestions may not be comprehensive, but a few of them which are in my mind.
1) What should a regular stock market investor do now?
If you are regularly investing in stock market without looking at where market is going, you should continue to invest. You should look at market correction (1000 points to 2,000 points fall in a week) and book part of the profits. In case of major correction, you should exit. You can re-enter at lower levels (difficult to say what is bottom level).
Also Read: How Systematic Equity Plan (SEP) in stocks can help you to overcome market corrections?
2) What should a short term investor do?
If you are a short term investor, don’t bet on the market now. You should exit appropriately during rallies. There are chances that you would incur losses if you wait for some more time.
3) I invest in Mutual funds, what should I do?
- If you are investing in large cap mutual funds, you should have seen that your mutual fund returns are not growing much compared to stock market returns in last 15 days to 1 month. The reason is mutual fund schemes are booking profits. Hence, unless you have any short term commitment of money, I don’t see any reason for you to exit mutual funds now.
- If you are investing in mid-cap/small-cap mutual funds, you should have got good returns by now. During stock markets fall / downtrend, mid-cap/small-cap stocks take a huge beating. About 5% of the fall in the Sensex, you could see 10% to 20% fall in mid-cap or small cap stocks. Hence investors in midcap/small-cap mutual funds may be little cautious. While mutual fund house would make every effort to come out appropriately during a market crash, you should keep an eye on your mutual fund returns and exit if required.
4) I am a new investor, excited about stock returns and mutual fund returns, want to enter the market now. I want to celebrate Mr.Modi’s success and expect that stock market reaches new high.
As a new investor, this is how one would think. But I doubt that whether one can enter the stock market now. You should wait and watch before making any fresh or lump sum investments now.
5) Are there any safe investment options now?
- Balanced mutual funds could be the best bet for you as equity exposure would be limited to 65%. The stock market crash may have a lesser impact compared to other funds.
- Ultra short term and liquid funds could provide stable and better returns in short term till the stock market stabilizes
- Our favorite bank FD’s could be an alternative option to park money till you make a fresh entry into stock markets.
Readers, what is your view about stock market investments now? Do you think that 30K Sensex is possible by end of 2014. Why do you think so?
If you enjoyed this article, share it with your friends and colleagues on Facebook and Twitter.
Suresh
Should you stay invested or exit from stock market now
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Hi Suresh ,
How are you? I hope everything is great!
How do you see the present markets? there have been some changes in markets after writing this article.
Please share your views as it will be helpful for all our readers.
Fine Thank you Shiv. I am still suffering from my neck-pain. Delay in responding to messages. I am not that expect to predict market, but I see some correction in short term, but positive on long term.
Dear Mr Suresh
Thank you very much for the nice article. I am investing in mutual fund (SIP route) since july 2010. My investment is
HDFC top 200
DSP microcap
ICICI discovery
Reliance small cap
Reliance equity opportunity fund
SBI Contra
Sundaram select mid cap
My investment horizon is 15-20 yrs. Let me know about selection of funds.
Thanks in advance
All are good except for SBI Contra fund. You can review and exit from such underperforming funds.
Thanks for your advice
Dear Sir
Kindly provide your view on following stocks as I am planning to buy 100 stock of each company (below) for long term investment minimum 2 years.
1) Kingfisher Airlines
2) Gammon Infra
3) Hind Motors
4) Indowind Energy
5) Indiabulls Infra
With regards
Piyush
Piyush, As of now, I am not doing complete research on stocks, hence not able to provide my views on these stocks
Hi Suresh, I am a regular reader of your advise/post and would like to get your advise. I have invested 50k in small and midcap funds and seeing very good returns right now. However, this is for long term investment say 15 to 20 years. Also, planning to invest more in same little by little (up to 5 lacks). My questions is, should I move this funds to large cap or some other MF for better returns? Please advise.
My 2nd question: I have purchased GSPL (326@117) & RPOWER (62@505 (transferred from RNRL)) about few years ago. I have big loss right now. Please advise if I should exit and take huge loss and invest somewhere else or stay for say another 7-10 years and I will get good returns?
Thanks so much.
Amit, if you are high risk investor and long term investor, you can stay invested in mid-cap funds. If such stocks have not able to cope up your loss even during markets boom, there is an issue. You should review and exit such stocks.
Thanks so mush Suresh for your advice.
Hello sir,
Thank you for sharing this informative post.
Good Article sir,
I am regular viewer of your articles, also I am investing in MF,IPO & in stock markets with the help of your articles.
Please suggest for – I am investing in SBI Pharma & ICICI FMCG funds through SIP from last one & half year should I continue the Pharma & FMCG sector Mutual fund or stop it and start the SIP in Infra & banking sector funds.
If yes then please also suggest good Infra & banking sector funds for next 3 to 4 year time investment.
Thanks in Advance for your valuable advice.
Mahesh, good to know that you are following my articles. How much money you made in IPO’s I am recommending. Have you invested in Wonderla IPO where I recommended first among all the websites. This is 55% up till now. You can go away from FMCG funds. You can stay invested in pharma sector. I would not comment on Infra and banking as we may see slow movement as of now.
When sensex was 22000 in 2008 but now Sensex was 25000 difference ?
2008 P/E Ration is – 28 now Current P/E Ratio is – 18 so now 10 times stocks are cheap It's right to investments for longterm investors..! Invest your money in Mutual funds.
Sir I am holding 70 dlf shares bought@rs.425 and 20 shares @rs.960 for more than 8 years. What should I do now?
Thanks for the good info, Suresh.
Can you please suggest the best "balanced mutual funds" now. I would like to invest on the same.As you suggested in the point#5. BTW, how long the amount going to be blocked in the MFs.
Kindly suggest.
Hi KK, You can look for ICICI Balanced fund, HDFC Balanced fund etc. You can invest this for 3 to 5 years period.
Hello Suresh Sir,
What is ur suggestion to long term investors (for 10 to 15 years in mutual funds)?
Vikas, My views expressed in this article would not change even in case of 10 to 15 years. You may be little careful for mid-cap funds of sector funds otherwise, you can stay invested.
Dear Suresh,
Can you give me some good stocks / sectors to invest during this NDA Govt.
Thanks
Ravi Nama
Sure Sure, give me some time.
Thank you very suresh..Your blog is very good and your info and approach is good.
Thanks once again for guiding us.
Very Nice Article Sirjee………..This is what I was thinking about this market.
Sir..I m 33 yrs..married and with a kid..right now I have decided not to continue my job and start as an entrepreneur. ..i have lots of interest in Stock market and mutual funds and keep myself updated on d current scenario. ..i m planning to do ncfm course n get certified in it. ..need ur advice on this decision of mine and career opportunities in this field or being a full time trader…..thanks n regards
Hi Tabish, Your decision is good. However do you have patience ? Many individuals have taken up such courses, but failed too. If you are passionate about financial market, you can do it. But it may take 1 to 3 years for you to stabilize and get good earnings.
Hi Sir
Very good article. and i just hope Modi makes our mother India a better place 🙂
Hi Suresh,
Is it the good time to invest in gold? Pls suggest.
Hi Anjum, If you are long term investor, you can invest every month in Gold MF or gold ETF’s. However in short term, the prices may come down.
Nice suggestion @ right time. Thank you
good article. thanks