Stock market investment: Here is what you must avoid

Stock market investment: Last week, Nifty once again made a new life high of 11,480 on back of renewed buying interest in banks and financials that outperformed the market. The impressive debut of HDFC AMC showed the hunger for quality business with great management. Corporate results continue to cheer the street. Of the BSE 500 companies, 411 companies that have declared their results recorded a revenue growth of 18.2% and Profit After Tax growth of 14.4% for the quarter ended June 2018. The banking sector saw profit booking in high-quality banks, with good asset quality.

Meanwhile, the overhang of the regulatory change, with regards to additional surveillance measure (ASM) and other margin requirements in the future & option (F&O) space seems to be over and there has been good recovery in quality mid-cap names. However, be careful while choosing the stocks in this segment, as not all will move up. Investors should differentiate between the ones that have fallen 50-60%, because of margin and other regulatory changes or because of earnings and profitability.

With oil correcting nearly 10% from the recent highs it made in early July 2018, oil prices are trading steady at $72-75 per barrel. The fear of oil moving higher is ignored by the street now. The trade war tensions between China and the United States seems to be continuing and any escalation here may impact the equity market in the short term. At the same time, India seems to be the least impacted in this global trade war scenario and this will help Indian equities outperform its peer emerging markets.

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Nifty, after making new high of around 11,480, is more likely to consolidate for the next few sessions, before making any further meaningful highs. Meanwhile, we see the index being more managed with few large caps moving up and a few others coming down and thereby being in a range bound scenario. With result season coming towards the end, markets will further take clues from the international markets and the development between US and China and their stand with regards to trade war. One should not be greedy but make bold and contrary bets. Cement, pharma, large PSU banks and some corporate facing banks give good trading opportunities. Nifty is likely to trade in a range, but action is likely in broader markets.

By, Anuj Shah
(The writer is head - privilege client group, at Reliance Securities)

Source: DNA Money