Calcutta, March 5: On Budget Wednesday, 540 points down. Turnaround on Thursday, only to fall again on Friday.
Post-Holi, a crash of 471 points.
Heads must be reeling and numbers must have lost their relevance as the battered sensex swings like a puppet on a global string.
However, for the prudent investor, the slide on the stock markets could throw open a window of opportunity.
After a roller-coaster week — triggered largely by global factors and fed to some extent by the budget — equity analysts are advising investors to buy shares because they believe the losses are less likely to extend for long.
“We are close to the bottom of the fall,” said Nilesh Shah, chief investment officer of ICICI Prudential Mutual Fund. “Long-term investors should gradually start buying stocks of companies that are leaders in their respective areas of business. Prices of many such stocks have come down to their 52-week low level,” he added.
The fall means stocks that under normal circumstances would have been too expensive are now more affordable.
Shah strikes a note of caution, though: “The return from equity investment this year cannot be as high as it was last year.”
The reason is that the gross domestic product of the country — if the figure rises, it is also a reflection of the profitability of companies — between January and March this year must grow at over 10 per cent to achieve the targeted growth rate of 9.2 per cent for the entire financial year. A 10 per cent growth rate is a tall ask.
The task has become more difficult because of a slowdown in exports in the aftermath of a recession- like situation in the US, India’s largest bilateral trade partner.
Besides, the bounceback in stock prices is expected to be neither across the board nor as steep as the surge last year. “Hence, investors should cherry-pick at a slow pace. The right strategy would be to buy shares of large and well-known companies at every dip in price so that the average price of acquisition becomes lower,” said Sanjay Sinha, chief investment officer at SBI Mutual Fund.
Investors can also get the benefits of dividends by buying shares now.
Several companies are considering an interim dividend before March 31 following the finance minister’s proposal to hike the dividend distribution tax from the next financial year.