top of page
  • Writer's pictureTikona Capital

Bulls vs bears – Who will win the fight on Dalal Street?

Updated: Sep 25, 2023

As volatility engulfs Dalal Street, investors eagerly await the outcome of the high-stakes battle between the bullish and bearish forces in the stock market. With escalating concerns over economic indicators and global factors, the clash between these opposing factions intensifies, leaving the fate of investors hanging in the balance.



SYNOPSIS


Portfolio strategy under advancing market conditions, when valuations are high and confidence is prevalent. Bullish markets have the potential for huge returns but also come with higher risks. It is crucial to have efficient portfolio strategies for surviving a volatile market environment tactically as well as behaviourally.



Complete Article at ET Market Moguls


Over the past week, Nifty has seen a classic fight between bulls and bears, with attempts to break the all-time high level seen in December 2022. While Sensex has touched an all time high, Nifty experienced consolidation at higher levels.


Interestingly, the Bank Nifty index has shown more weakness compared to the Nifty. Global markets continue to deliver mixed performance with many markets near their yearly high – Nasdaq, Nikkei DAX, Kospi while few like Hong Kong and Russia lagging.



Taking a closer look at the financial performance of different sectors in the past quarter, we can observe that sectors such as Nifty Bank, FMCG, Auto, Realty have outperformed. On the other hand, Nifty IT has underperformed, except for a few companies.


As per our estimates among the Nifty constituents, select large companies - banks and autos have exceeded the net profit estimates. This performance was mainly attributed to the bank's loan growth and improved asset quality.


On the other hand, IT companies including global commodities have missed their profit estimates. The IT sector witnessed moderate growth due to slow down in the western economies; FMCG growth was primarily led by pricing despite the dwindling volumes.


Ameliorate Portfolio Stratagem – as we call it in Greek – What is the strategy going forward?



In the realm of India's flourishing market, where growth and opportunities abound, it is essential to employ a well-crafted portfolio stratagem to navigate the landscape effectively. To capitalize on the high-growth potential, the art of optimizing portfolio strategies takes centre stage.


Portfolio strategy under advancing market conditions, when valuations are high and confidence is prevalent. Bullish markets have the potential for huge returns but also come with higher risks. It is crucial to have efficient portfolio strategies for surviving a volatile market environment tactically as well as behaviourally.


Tactically we need to apply these time-tested techniques.



Prioritize quality:


Given that midcaps have outperformed in a FYTD basis it is pertinent to follow and back companies with good quality promoters and sustainable growth companies. While special situations may come but it’s prudent to book profits in such investments.



Prioritizing quality investments becomes more crucial in a competitive market. In turbulent market circumstances, quality firms with solid balance sheets, long-term competitive advantages, and steady profits growth often perform better.


Concentrate on companies with strong fundamentals, steady cash flows, and a history of generating value for shareholders. To find such businesses across multiple industries, do in-depth research and analysis. Currently financials, FMCG select auto ancillary stocks fall in this category.


Maintain a diversified portfolio:


Regardless of the state of the market, diversification is still a fundamental concept more so when the markets are near its all-time highs.


A well-diversified portfolio offers protection from possible drawdowns and reduces exposure to risks associated with certain stocks or industries – like global exposed stocks.



While funds can take more defensive calls in their equity funds, HNI’s and Family offices can diversify with alternative assets – Bonds, AIF, Unlisted equities or Private equity funds. This diversity can give stability during a period of strong market activity and serve to lessen the effects of market volatility.


Take note of defensive sectors:


When markets are up, it may be wise to devote some of your portfolio to protective sectors. Consumer goods, healthcare & Pharma, utilities, and critical services are some of the defensive sectors since they are given lower sensitivity to economic cycles and market changes.


These industries frequently offer stability and consistent cash flows, which makes them resistant to market drawdowns.


Behaviourally we need to embrace these characteristics.


Implement active risk management:


Risk management deserves more focus in a strong market. To reduce possible losses, use stratagem like stop-loss orders or book profits when the investment thesis has changed.


To see any possible red flags and take the necessary action, active monitoring and frequent portfolio reviews are crucial. Global events to give you an example of BOE raising rates ate more than expectations can impact portfolios in shorter term.


Exercise self-control and refrain from FOMO:


Investments are sometimes enticed by high markets by fear of losing out on prospective rewards. It is imperative that you emphasize the value of discipline and long-term investing. Have reasonable expectations and steer clear of following momentum in the market.


Be informed about the risks associated with high beta stocks and the possible repercussions of impetuous financial drawdowns based only on market momentum.


Conclusion:


Although a volatile market environment can be difficult for investments, it also offers chances for portfolio optimisation. While the fight between the bulls and bears continues, we must not miss the opportunity of India’s Amrit Kaal where it is expected to be the fastest growing economy of the world.

India is riding the global leadership scale and striking deals for the people of the country. Every sector will likely see global leaders emerging, while there can be short term volatility given the fight, we continue to be positive on financials and domestic sectors.

Leaders are likely to emerge from auto and auto ancillaries sector as well, with energy prices falling many sectors like FMCG, cement are likely to benefit. Pockets of opportunities will emerge in chemicals and IT once the global growth volatility settles.

We need to apply tactical as well as behavioural techniques in the current scenario. We can navigate a high market with greater confidence and possibly experience long-term success by maintaining a diversified portfolio, concentrating on high-quality investments, implementing active risk management, investigating alternative investments, and remaining disciplined.



Sumit Poddar

Founder & CIO

Tikona Capital



34 views0 comments

Komentar


bottom of page