February 29, 2024

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How to buy stocks in current volatile stock market? 5 things you should know

Global equity markets including Indian stocks are reeling under the sell-off heat after the outbreak of Russia-Ukraine war. In YTD time, the BSE Sensex and NSE Nifty has fallen to the tune of 8 per cent while S&P Mid-cap index has corrected around 10.25 per cent in this period. In year-to-date time, S&P small-cap index has shed around 14 per cent. So, buying stocks in current market seems little tricky as small mistake may lead to big loss in near term.

On how to buy stocks and build one’s stock portfolio in current volatile market, Anchal Kansal, Research Analyst at Green Portfolio — a SEBI registered portfolio management service provider firm said, “Any portfolio an investor builds must be suited to their goals. Above all else, a resilient portfolio will be backed by fundamentally sound companies. Companies with low debt, high-end management and strong margins, are some of the important features that an investor should look at while picking a stock in current volatile market.”

‘Cycles are inevitable, and interest rate hikes are unwarranted. During volatile times like these, investors must gradually build up their portfolio and exploit mis-pricings and overreactions. Exogenous factors will drive short-term returns, but as an investor, a portfolio is designed for the long haul. And in the long haul, what matters is only the company’s fundamentals and associated cash flows,” said Anchal Kansal of Green Portfolio.

Advising positional stock market investors to convert this challenge into an opportunity, Punit Patni, Equity Research Analyst at Swastika Investmart said, “The current volatile markets are one of the best times to invest and investors can deploy funds in a phased manner i.e. lump sum investment must be avoided. The recent selloff has turned the valuation of quality companies and growing stocks reasonable. We suggest investors use this opportunity to lap up companies with good fundamentals, robust financials, and competitive advantages.”

Punit Patni of Swastika Investmart went on to add that investors can follow some of the mentioned cues to build a portfolio during current times:

1] Buy for the long term;

2] Investors must perform due diligence before investing and invest in those stocks where they have a complete understanding of the underlying fundamentals;

3] Diversification is a must, however too much can dilute the overall returns;

4] Understand risks while opting for small-cap, mid-cap and large-cap stocks; and

5] Debt-free companies that have fallen lesser than its peers are expected to rebound at a faster rate once the market gets stabilized.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

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