Riding Volatility The Proper Way Will Leave You Wealthier!
Riding Volatility The Proper Way Will Leave You Wealthier!
If you recollect the famous dialogue of Bollywood blockbuster movie Dabangg ‘Thappad se darr nahin lagta saahab, pyar se lagta hai’. Well, recently, investing forums and social media are flooded with such dialogues on the stock markets, the latest one being ‘Investing se darr nahi lagta hai saahab, high debt companies se lagta hai’. This sums up the entire week's action on Dalal Street. The markets over the last few days have severely punished companies with questionable corporate governance or with an overarching problem of debt. This has resulted in retail investors undergoing one of the worst period with their portfolios, with values of stocks dipping every day and their recent bottom fishing bets going awry even as Nifty seems to be going steady. If you are an investor who missed out the action over the last week or so, and if you are gazing at the terminal looking at prices of stocks such as Jet Airways, which is trading lower, and Jain Irrigation, which is quoting around mid-20s, don’t think it is due to corporate adjustments such as bonus or split. Such is the quantum of punishment the stocks have faced recently. Amidst all this, HDFC AMC emerged as superhero for the Fixed Maturity Plans (FMPs) as HDFC AMC planned to transfer Rs 500 crore worth of the FMPs' exposure to Essel Group firms to its own books. So what is the way forward for the investors? Time and again, we have cautioned investors not to indulge in reckless investments just to make quick money from the market movement. As an investor, you have to accept the changes the markets are undergoing lately. Yes, there was a time when in a bull run, even the Tom, Dick and Harry stocks delivered quick returns, but over time, the markets have evolved and so should your investment philosophy. We are sure many investors would know by now that sticking to quality stocks is always the right choice after having witnessed a sharp crash in the financially weak stocks lately. Quality means much more than just the name or brand. It also refers to the strength of the company’s financials. Always exercise due diligence before taking an investing decision and, most importantly, invest only from your surplus funds.
On the global front, the key US indices have rallied and providing the momentum to bullish trading are some positive triggers. President Donald Trump tweeted that he had a productive conversation with Chinese President Xi Jinping and that there will be an ‘extended meeting’ with Chinese President at the G-20 summit in Japan. Also, the Federal Reserve kept the interest rates unchanged on expected lines and displayed a shift from its language of ‘patience’ to indicate it is ready to ease monetary policy, if needed. Meanwhile, the boost to the European markets emerged from dovish comments from the ECB President Mario Draghi, who indicated that the bank will announce more stimulus, which could be through rate cuts or asset purchases, to bolster growth.
While the coming week will be relatively light on economic releases on the domestic front, volatility will remain elevated in the second half of the week due to June series F&O expiry. The markets participants will keep one eye on the skies as the progress on the monsoon would hold the key. After its onset on June 8, monsoon became stagnant for 4-5 days and, as per the recent report of Skymet, the first sign of appearance of cyclone Vayu had indicated that worse is in store for monsoon this year. As an investor, you need to understand you are not investing for a week time frame, as over that time frame, you may witness volatility or pullbacks. Riding volatility the proper way will leave you a wealthier investor over your investing journey.
