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Rediff.com  » Business » Experts advise selective buying

Experts advise selective buying

By Veena Venugopal in Mumbai
June 01, 2006 12:11 IST
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Though markets have fallen 18 per cent from their peak levels, brokers are not advising investors to go on a buying frenzy.

The bear market, over the last three weeks, have brought shares into attractive valuations but brokers are advising selective buying, as they feel prices may come down further.

"We are going to keep experiencing a correction, price wise and time wise. My best guess is that stocks would become cheaper than they are now," said Ramesh Damani, member, BSE.

"It is not always necessary to buy in dips. Investors should buy only when there is value. My advise now is to sit on cash, stocks will get cheaper," he added.

Market experts predict highly volatile trade in the medium term. Several factors affecting domestic markets are beyond anybody's control or prediction, according to them.

With Indian markets getting increasingly aligned to global markets, even if all goes well domestically, international factors would determine liquidity and momentum, say analysts.

There are sectors and stocks whose valuations still look a bit stretched, according to Girish Nadkarni, chief operating officer, IL&FS Investsmart.

"Our advise to clients is to wait and watch, there may be further downsides in this market. Investors should look for opportunities and specific valuations. Also, it is important that in this market, no one should look at an investment horizon of less than six months," he said.

Brokerages and research houses are also reworking their analysis based on the changing fundamentals. "Our anticipation is that the Reserve bank of India would be forced to announce a hike in interest rates. Corporates have committed to capacity expansions in the last 12-18 months, now the costs of these expansions are likely to go up with the cost of money going up. Fundamentals in India are changing and the new fundamentals are being worked into our projections," said the research head at a broking house.

"Markets have got over valued and now risk is being shown to investors. We are all hostage to world events as well. It is likely that even if markets look less volatile globally, in India there could be continued choppiness. The view on the Indian market is that it would remain volatile with a downward bias," said Andrew Holland, Executive Vice President, DSP Merrill Lynch.

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Veena Venugopal in Mumbai
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