It’s Results Season. Keep Your Seatbelts On!

Welcome back, I hope you all had a good week in the markets and otherwise too. The past week kept us investors on the edge of our seats with lots of action and news flows. While the indices moved in a narrow range, we had some wild swings in certain stocks and even sectors as a whole, this is going to be the theme for this week as well.

The automakers led by some big names had a healthy correction on Tuesday and Wednesday, thanks to a guidance on the global chip shortage impacting future sales. A big name in the sector hit a lower circuit in minutes and that set off a lot of alarm bells.

Now if you’ve read my previous articles, that was my point all along, when a stock corrects 12-15 per cent, will you panic and run, or will you take it as an opportunity to come in as a buyer who sees value. As an investor, I would be sitting on between 30 per cent and 40 per cent cash, patiently waiting, looking for opportunities and these come up often. The global chip shortage is not a new story, in fact it’s been in the news for months and if you have visited your nearest car showroom to buy a car recently, the waiting list on any of the top brands will shock you.

The market knows this and factors it in, hence when the fundamentals are strong and a company is the bluest of the blue chips and you get an opportunity, be quick and take it. Again, this is just a note to self and my thought process, not a recommendation to the readers, reiterating, I am not a Sebi-registered advisor.

Today, results season gets underway in India and that always leads to exciting things happening in the market. TCS will start things out and then every day we will have companies reporting. Hence, a lot of company-specific and sector-specific action can be expected. I’m pretty excited for the week ahead and looking at deploying funds where I see value and opportunity.

This earnings season will be crucial as it’s also going to determine the PE ratio for the Nifty. It’s an important indicator that I’ve always kept an eye on. This number had shot up to 41.23 in February 2021 and has now almost come down to a one-year low of 28.50.

An interesting fact for investors to keep an eye on will be while the markets move towards an all-time high, the Nifty PE is at a 12-month low! That said, the impact of the second wave of Covid will also be reflected in the results of this quarter.

I’ve stopped giving the Nifty hitting 16,000 discussions, too much weightage, it will happen, it’s only a matter of when. It could be today and it could be next week but it will happen. Also, once it does, we could see a further rally of a few hundred points and maybe even a small correction with the support levels at 15,700 or thereabouts. The key lies in having a diversified portfolio and limiting your exposure in a stock to no more than 10 per cent of your holdings.

Don’t also suffer from FOMO (fear of missing out), if your friend’s portfolio shares rallied and yours did not. Just be patient, the trend is our friend and as long as you’re picking fundamentally strong businesses and industry leaders your time will also come.

My thoughts on the week ahead, the Bank Nifty is going to be leading the charge and banking stocks are on my shopping list, metal stocks showed strong signals on Wednesday and I expect that to continue. The pharmaceutical sector stays as my hedge and should consistently edge up. Another point to note is that some mega IPOs coming in the weeks ahead and a little bit of money might find its way into the primary market as well. Crude stays at high levels, the dollar is still strong, the monsoon advance is still a little sluggish and these are some of the negative factors that will weigh us down. Personally, my belief is that there should always be some negative factors in play, when things look too good and everything is positive, the market surprises us and show us how it’s one of the greatest levelers. 

You all have a great week ahead, stay safe, stay well and keep your seatbelts on. An action-packed week awaits.

The author is Founder, Gaurav Bhagat Academy

DISCLAIMER: Views expressed are the author’s own, and Outlook Money does not necessarily subscribe to them. Outlook Money shall not be responsible for any damage caused to any person/organisation directly or indirectly.