Trading Guide: Is 2022 the right time to book profit on your equity investments?

There is an old adage in the markets that “bull market climbs a wall of worry” in this context one has to be mindful that bull market corrections are sharp and treacherous.

Ever since the markets made a low in March 2020 Nifty at 7500, we saw a one-way movement in the markets with the Nifty50 rallying to 18,600 and there have been regular talks of the overvalued market and profit booking.

We spoke to Aditya Sood, Fund Manager - InCred PMS on what should investors do post steep correction seen in the market:

This is the first meaningful correction that we have witnessed since the COVID started and despite headline indices correcting 10-15%, many stocks have corrected by 20-50 percent on account of divergence in sectoral trends.

Opportunity for wealth creation lies in sectors and companies that have underperformed markets and peers either due to transitory externalities (NPAs / chip shortages / covid recovery), execution delays or due to sheer lack of investor interest, despite offering a healthy earnings growth outlook.

Looking only at headline Indices for deciding on taking profit off the table is not a prudent investing style. There are sectors which have underperformed the market indices in 2021 which includes FMCG, Pharma, Auto and Financial.

The volatility may continue but it also provides ample opportunity to realign the portfolio and be future ready.
 
The Indian equity market continues to benefit from the monetary policy of central banks and strong domestic cyclical recovery.  

We believe that the equities are in mid-cycle with market multiples not being inexpensive and earnings growth rebound would support valuations.

Several factors may favor for continued strong earnings growth in Indian equities, namely start of the capex upcycle led by higher outlays for infrastructure projects, PLI incentives for manufacturing, deleveraged balance sheets and decadal low cost of capital; strong recovery in consumption rising disposable incomes in services sector and real estate demand fueled by pent up demand and increasing supply of credit.  

At this juncture there is no dearth of money-making ideas and for utilizing the volatility in the markets to look for opportunities in the market on a bottom-up basis which is more relevant rather than focusing on the index correction.

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