Free-Fall How to hang on when markets don’t

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to sustain the market at a certain level. But this is a known fact and history signals that FIIs (foreign institutional investors) are the biggest triggers of India’s equity markets. And looking ahead, growth will be dependent on global liquidity.

The most important question remains — what to do now? Should we liquidate our portfolios, is down by around 30%-40% or hold on for some more time? In this uncertain period, investors can use a few strategies, depending on their risk for appetite and preferences. Here are few of them:

High growth & momentum

Every investor wants to earn higher returns in lesser time. This has always attracted investors towards growth-oriented companies and momentum stocks as both move faster than defensive and dividend-yield stocks until the markets are good and going up. When the market declines, moementum stocks take a much more sharper decline and plummet faster due to higher price-earnings multiples. No doubt, growing companies are smart investments, but one must look at the past run-up in stocks. If the stock has delivered quick returns in less time, then the chances for its rise would be less. If you want to take exposure then one should book profits in the short-term.

These stocks can be bought after a heavy correction and by checking the price-earning multiples. If the price-to- earning growth ratio (PEG) is less than 1.5, it is said to be fairly valued and can be bought at this level. However, you cannot afford to ignore checking the track record and ability of the management to deliver the good results year-after-year.