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Buy The Fear, Sell The Greed

Frontline stocks are back in the reckoning, trading close to the levels of 8,700 on the Nifty, just about 300 points away from an all-time high

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A sudden bout of volatility due to the border skirmishes dragged stocks down last but did not dampen investors' enthusiasm of buying at lower levels. Stocks are rebounding nicely after last week's nerve-wracking tumble that saw volumes evaporate in the mid- and small-counters and some even lost over 10 percent.

But their recovery has been equally swift and investors buying the fear have found are being reward. Investors nimble on the buy button during volatile days are seeing smart gains in their portfolios.

Large caps stocks held much of their ground last week as foreign investors are continuing to make purchases. Frontline stocks are back in the reckoning, trading close to the levels of 8,700 on the Nifty, just about 300 points away from an all-time high.

Markets are showing the resilience and the support at lower levels is getting stronger. Even despite news coming the global quarters that the US Fed is likely to raise rates in December, demand for stocks continues to remain strong from foreign investors. Global markets will soon be bracing for a December hike, but in the meantime investors are making merry.

Indian stock markets are volatile and there can be no hiding from the fact that volatile days can be unnerving. Buyers tend to shy away when there is bad news which often sees volumes in the mid- and small-cap counters dry away. But in the current environment with demand picking up in the consumption stocks, such volatility is proving great opportunities to add in the stronger counters.

On the other hand, bouts of volatility are becoming more frequent. Markets are at their highs. The PE levels are at an above average zone of 23+. Hence, prices will react sharply to bad news. It is a known fact that markets tend to rise slow and steady, but the falls are swift and severe. So, if one can withstand the dips, markets can prove greatly rewarding in the longer run.

Scores of stocks are trading close to their all-time highs including Tata Motors, Force Motors, and Maruti.

The auto and auto ancillary sectors are considered a sturdier bet for the longer horizon. Maruti can get entry into any portfolio despite its high valuations. Auto component maker, GNA Axles also listed at a premium and saw some accumulation in the counter at lower levels.

New listing ICICI Prudential Life Insurance failed to make a stellar debut falling below its offer price of Rs 334, but a later recovery saw the stock tick up to Rs 310.

If one looks at the India growth story over the horizon of three years, many stocks do make the accumulation list now. In the next three months to a year, however, stocks will make the volatile list. But with foreign inflows stronger than ever, the ramp in stock prices will be better over the next few weeks.

A sure shot way to make money in this market is to buy the fear and sell the greed. As stock markets dips can be significant, the returns can be better when investors patiently accumulate in volatile markets, as we are familiar with.


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