While the recent correction and rising volatility has spooked some investors, ace stock picker Porinju Veliyath advises market participants to use the rare opportunity and buy shares of solid businesses. Pornju said in a tweet that the current depression is a rare opportunity to part-own some of India’s solid businesses. The perennially bullish investor said that ‘Discount sale’ will not last beyond March. “At least 20 million Indians are ready & waiting to invest in equities, for the first time. The current depression is a rare opportunity to part-own some of India’s solid businesses. Remember, ‘Discount Sale’ won’t be extended beyond March,” Porinju Veliyath tweeted.
Notably, the long-term capital gains tax on equities which was introduced in Union Budget 2018 also kicks off from April 1,2018. Its introduction had dampened the investor mood in February this year. While Porinju Veliyath has often advised investors to put their money into stocks of solid companies, he says that they must choose stocks very carefully.
In a recent interview to ET Now, the ace investor cautioned investors against investing in companies with poor corporate governance track record said that at least 25% of the listed players will out of business in the next 10 years. “For amateurs and new investors it may be difficult to invest in the markets. For them, it is safer to invest in companies with proven track record, with the big picture and how the companies going to shape up in the next 5-10 year period,” he told the channel.
The Sensex has shed close to 2%, wiping off 700 points since January-18, while the broader Nifty 50 has corrected by nearly 3% in the same period. Experts point out that the stock markets are likely to see heightened volatility due to domestic as well as global factors such as political scenario in India, increase in the 10-year US yields, rising crude oil prices and earnings downgrades. Saurabh Mukherjea of Ambit Capital says that he sees a 15% correction in largecap shares and about 30-40% correction in small and midcap stocks. Notably, the BSE MidCap index has lost more than 300 points in the last one month alone.
While investors may look for undervalued companies, Porinju Veliyath points out that there might be good companies available at slightly expensive valuations of 30-40 times earnings and such companies may never get cheaper. Further, Porinju Veliyath told in the same interview with ET Now that amid a 15-20% correction in the stock markets, these stocks may provide a good downside protection.