Protect downside risks as you profit from the bull run
The markets offer opportunities to profit at various points; play it to your advantage
The Indian equity markets have risen twofold since their lows of March 2009. The Sensex’s current PE (price to earnings ratio) is around 24, which is almost 33 per cent higher than its 10-year median PE of 18.10. Over the last one year large caps have given returns of around 23 per cent, but they have been far outpaced by the mid- and small-caps which have run up by 36 per cent and 49 per cent respectively over this period. Further, most of the market’s gains have come since the beginning of September: while it was up barely 2.3 per cent from the beginning of the year to the end of August, it has risen sharply between the beginning of September and the end of October.
After the latest run-up, the ‘C’ word (correction) is once again on investors’ minds. Moreover, the markets have been driven largely by inflows from abroad with foreign institutional investors (FIIs) having invested about US$ 22 billion in the Indian equity markets this year. Since the ghosts of 2008 have not yet been exorcised, another fear preying on investors’ minds is whether there could once again be outflow of foreign funds. Further, with the markets poised at high levels, the value investor’s task of finding undervalued stocks has become harder.
Against this backdrop, there are many questions on investors’ minds today: how should he go about booking profits? How should he protect his portfolio against a possible correction and at the same time continue to participate in the long-term India growth story? To read more about the eight strategies tweak your asset allocation, reduce exposure to mid- and small-cap, get rid of lemons in your portfolio, do a reverse SIP and more. To read the full story, pick a copy of Wealth Insight that details all the eight strategies for a bull market now.
-- Dhirendra Kumar
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The markets offer opportunities to profit at various points; play it to your advantage
The Indian equity markets have risen twofold since their lows of March 2009. The Sensex’s current PE (price to earnings ratio) is around 24, which is almost 33 per cent higher than its 10-year median PE of 18.10. Over the last one year large caps have given returns of around 23 per cent, but they have been far outpaced by the mid- and small-caps which have run up by 36 per cent and 49 per cent respectively over this period. Further, most of the market’s gains have come since the beginning of September: while it was up barely 2.3 per cent from the beginning of the year to the end of August, it has risen sharply between the beginning of September and the end of October.
After the latest run-up, the ‘C’ word (correction) is once again on investors’ minds. Moreover, the markets have been driven largely by inflows from abroad with foreign institutional investors (FIIs) having invested about US$ 22 billion in the Indian equity markets this year. Since the ghosts of 2008 have not yet been exorcised, another fear preying on investors’ minds is whether there could once again be outflow of foreign funds. Further, with the markets poised at high levels, the value investor’s task of finding undervalued stocks has become harder.
Against this backdrop, there are many questions on investors’ minds today: how should he go about booking profits? How should he protect his portfolio against a possible correction and at the same time continue to participate in the long-term India growth story? To read more about the eight strategies tweak your asset allocation, reduce exposure to mid- and small-cap, get rid of lemons in your portfolio, do a reverse SIP and more. To read the full story, pick a copy of Wealth Insight that details all the eight strategies for a bull market now.
-- Dhirendra Kumar
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