Shift your appetite towards large-cap names

Indices have witnessed a 15 percent drawdown over the last four weeks. This carnage has happened mainly on account of a massive sell off in the global markets triggered by the downgrading of US Economy by S & P. With our domestic economy anyway facing pressure on account of rising interest rates and slowdown in the progress of infrastructure projects due to cost escalations, high interest costs and lack of policy initiatives by the government, equity markets had begun to look expensive and due for a correction. This global turmoil gave the much needed excuse for our markets to correct. Though the mayhem in the developed world may not affect us significantly, yet majority of our funding for infrastructure projects comes from the developed world. A significant slowdown in the global economy will impact our progress though it will certainly not be as severe as the impact on certain other emerging economies which are heavily dependent on exports.

This pain is likely to continue for some more time and may get a little worse before finally improving. Positive aspect though is that certain segments of our economy are still doing well. Companies dealing in goods and services which are of regular consumption by domestic investors are still prospering. We have been advocating investors to focus on stocks of companies benefitting from the domestic consumption boom. A large number of stocks in this space have held out pretty well during this collapse. Going forward too these stocks are likely to hold on to their gains. However the other segments of the market have fallen significantly and many stocks in the infrastructure, banking, IT and automobile space are now available at very attractive valuations. While retaining exposure to the consumption sector it makes sense to start nibbling at these sectors which have been battered and are after a longtime are offering compelling valuations. Focus on large, frontline stocks as they are likely to witness buying support moment sentiment improves again.

To sum it up, we are likely to remain in a bearish zone for some time but these gloomy times present wonderful buying opportunities for long term investors