Indian markets witnessed a significant sell-off following the global market rout on Tuesday, with the Nifty50 and the S&P BSE Sensex slipping over 3%. The BSE Mid-cap and BSE Small-cap indices underperformed the frontline benchmarks, losing over 4% in intra-day trade. The rout came after US stocks plunged in highly volatile trading on Monday, with the Dow industrials falling nearly 1,600 points during the session, its biggest intraday decline in history, as investors grappled with rising bond yields and potentially higher inflation. Analysts say the correction was long overdue after the sharp run up in calendar year 2017 (CY17), and has been triggered off by global events.
Back home, imposition of long term capital gains tax, although grandfathered till January 31, 2018, saw investors realign their portfolio.
So, what should your portfolio strategy be now? Analysts say investors who have an appetite for risk should look at large-cap stocks as the bounce-back in those counters will be faster once the markets start to recover. “It is time to possibly deploy some amount of the investment capital but mainly in large caps. Mid-cap and Small-cap segments may see further sell-off and more importantly, if the earnings disappoint for these companies, then a further meltdown is on the cards for broader markets. Large-caps are likely to recover on a likely improvement in the third-quarter earnings. Investors must look at companies that are cash-rich with impeccable management and good business strategy,” said Gaurang Shah, head – investment strategist at Geojit Financial Services. G Chokkalingam, founder, Equinomics Research and Advisory recommends buying MRF, Lupin, Bharti Infratel and HPCL. “With (interest) rates rising, oil prices, monsoon, state elections, inflation, US Fed rate hike on cards, 2018 may not give a more than 5 – 10% return in the best case scenario. “ Shah’s December 2018 target for the Nifty 50 and S&P BSE Sensex is 11,800-12,000 and 37,000 levels, respectively.