Reviewing company’s performance regularly to avoid ‘Tulipmania’ like bubble in your portfolio: Ruchit Jain of 5paisa.com

Ruchit Jain, Lead Research, 5paisa.com said that investors should review company’s performance regularly which will help investors to make informed decisions.

In an interview with Zeebiz's Kshitij Anand, Jain said that when markets correct low-quality stocks result in a dent in the portfolio, and hence, one should stick to quality when it comes to investing in mid-cap and small-cap stocks. Edited excerpts:

Q) Market closed with a loss of nearly 1%. What led to the price action?

A) Post the RBI Policy on Thursday it seemed that the markets were geared for a resumption of the positive momentum as the Nifty as well the Bank Nifty index reacted positively.

However, as the event was over, the focus shifted back to global cues which saw a sell-off in equities due to the rising U.S. Bond yields.

Our markets too witnessed selling pressure due to this on Friday, which resulted in a broader market sell-off.

Q) The RBI governor referred Cryptos to Tulipmania (a speculative bubble). I am there are a lot of stocks that might be moving on hype as if there is no tomorrow. How can one spot these stocks and make an informed decision?

A) Bull market usually leads to buying in the large-cap stocks first, but when the bull market matures and moves towards its end phase, traders and investors are more attracted towards low quality or penny stocks as they get attractive returns there in a short period of time.

However, when markets correct, such stocks result in a dent in the portfolio, and hence, one should stick to quality when it comes to investing in mid-cap and small-cap stocks.

Reviewing the company’s performance regularly is a necessary approach that helps investors to make informed decisions.

Q) What is your view on Sensex, Nifty for the coming week. Key levels and any big events to watch out for?

A) If we meticulously observe the recent price momentum in Nifty, then we could see the formation of ‘Lower Tops’ and ‘Higher Bottoms’.

The Nifty50 recently formed a high around 18300 first, followed by intermediate highs of 17800 and now 17640.
On the flip side, the intermediate lows of 16410, 16830, and then at 17040 indicate higher low formations. Such structure of ‘Lower Highs and Higher Lows’ in the index are usually formed in a consolidation phase which indicates that Nifty is consolidating within a ‘Symmetrical Triangle Pattern’.

Until we see a clear breakout from this consolidation, the market is likely to continue such directionless moves and hence, focus should now be on stock-specific trades.

The support end of the mentioned ‘Triangle’ pattern would be seen around 17130-17150 while 17570-17600 would be seen as resistance.

For the coming week, we expect Nifty to trade within this range and only a breakout on either side would lead to the next directional move.

Q) Sectorally, the action was seen in metal space while the realty and capital goods sector closed in the red. What led to the price action?

A) The Metal space has seen a time-wise as well as price-wise correction recently. After forming a support base in the range of 5200-5300, the metal space seems to have resumed its momentum, and hence, we expect the outperformance to continue in this sector in the short term.

The Realty and the Capital Goods index had witnessed good buying interest in the last couple of quarters. However, these sectors have seen some correction since mid-October along with the broader markets.

The medium-to-long-term chart structure still remains positive and hence, this just seems to be a time-wise correction within an uptrend.

One should look for stock-specific buying opportunities on declines as once the benchmark resumes its uptrend. We expect these sectors to do relatively well in the medium term.

Q) Banking stock got a boost from RBI policy on Thursday and NiftyBank reclaimed 39000. What are your views on the banking space?

A) Although, in the year 2021, we witnessed some relative underperformance from the banking space, this calendar year 2022 has started on a positive note as we can see returns of 8% in Bank Nifty since the start of the year v/s marginal returns in the Nifty.

This indicates buying interest in the banking space and the Private, as well as PSU stocks, are witnessing good buying interest.

Hence, we expect the banking index to continue its leadership in the next leg of up move in the market. One should continue to trade with a positive bias and keep a ‘Buy-on-dip’ approach for this sector.

(Disclaimer: The views/suggestions/advice expressed here in this article are solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)