Authored ArticleEconomyFinance

Factors to watch out for while picking stocks for budget

By Mr. Jyoti Roy – DVP- Equity Strategist, Angel Broking Ltd for Prittle Prattle News

The gong is about to ring as the Union Budget is just around the corner. In a few days, the Hon’ble Finance Minister will unveil the country’s economic roadmap for the upcoming financial year. The excitement is already high. Everyone from ordinary people to businesses is ready with their wishlist. It is natural for the stock market to reflect this enthusiasm as well. Benchmark indices are trading at their all-time high levels. 

So, how should you build your position before the bahi-khaata seals the fate of the nation for an entire year? Here are a few factors that will get you through.

  1. Anticipate Volatility: Before the budget, much speculation flows in the market. Economists come up with their projections. Business leaders let their demands known. Different figures and estimates do round with extrapolations. All of it contributes to the market speculation with investors taking their respective positions. Individual stocks become overvalued while some trade below their fair market price. At times, there will be rapid swings in the stock prices. Anticipate the same. 
  2. Eliminate Speculation: It sounds fascinating to take a market position based on some speculation. However, keep in mind that budgets are not drafted based on it. They are based on hard economic figures, available resources, and immediate and long-term needs. So, it would help if you avoided speculative calls from seeping into your portfolio.
  3. Invest in Long-term Fundamentals: With high volatility, investing in the short-term might not be a viable option. You must invest in long-term fundamental calls. Try and gauge which stock has strong fundamentals, a good business model, reasonable valuation, and an affirmative historical performance. It will insulate your portfolio from short-term calls that are subject to corrections.
  4. Buy the dips: There’s another positive impact of curating a list of stocks having strong long-term fundamentals. Using this approach, you can buy such stocks even if there are any corrections in them later. Speculative calls tend to show their true worth on the budget day. At times, such calls even end up weighing on the stocks having good long-term fundamentals. So, keep a list of such stocks ready with yourself. See if there are any corrections in them either on the budget day or before the same. Buy them during the dips.

In a nutshell, make sure that your investment strategy is driven by fundamentals or tangible value and not by the news desk. It will go a long way by insulating your portfolio from the associated downsides. Union Budget is a critical part of any country’s growth story. Make the most out of it!

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