Stock advice: Where should I invest?

'Investors should plan and make investments strictly on the basis of their risk profile.'
'They should not bite more than they can chew.'

Dr Joseph Thomas, head of research, Emkay Wealth Management, tells Prasanna D Zore/Rediff.com, "Investors must get their portfolio built over a period of time. They should not be making lump sum investments all the time."

• Part 1: Why markets jumped 70% in 8 months

What about those retailers who had entered the markets between March-April 2020 and are sitting on more than 20-30 per cent profits in their portfolios?
Should these investors book some profits now that the markets are again at all-time highs?

There are two things that you can do depending on whether one has entered the markets tactically or strategically.

If their investments in March 2020 are strategic in nature, they can hold onto that investments because they made that investment at a very good base level for them to hold it in their portfolio (the 50-stock NSE had hit a low of 7511.10 on March 24, 2020; as of November 22, 2020, the NSE had closed at 12926.25, a gain of whopping 72 per cent in eight months), even if a correction happens, which could be 25 per cent or 30 per cent of what we had seen earlier.

These strategic investors already have their profit cushion to hold on to those positions for at least three years or even five years.

The second group of people might have entered the markets in March 220, basically from a tactical investment perspective, which means they invested in March expecting that they could make some good money over a period of six months or one year.

If these positions were taken with tactical, temporary allocation with a six months or 12 months investment in mind to take advantage of an opportunity then they can partially book profits, because they might have got an appreciation of maybe anything from 20 to 30 per cent or maybe 40 to 50 or even 60 per cent depending upon where and when they invested their money.

Partial profit booking could be done because the market has already given you extraordinary returns, which may not be sustained. We cannot expect the same March-November moves to happen again in such a short time.

What will be the sectors or themes that one should aggressively chase once the economic engine starts humming and the COVID-19 vaccine is operationalised on mass scale.

The general impression is that once the vaccine starts rolling out and people get their inoculation and all, then all those sectors which were picked up because of the COVID-19 pandemic will be sold off and the other sectors will be picked up. I don't think it will be very much like that.

Sector-wise, pharma or healthcare businesses can continue to do very well for the next one or two years. The BFSI sector too could do very well because it was beaten down substantially and the Bank Nifty (an index that measures the performance of major banking heavyweights) remained around 21,000 for very long time. And now it has moved up to around 29,000 plus.

Though in this sector too a big up move has happened, we still feel that the banking and financial services sector investors should look at very well and actively managed mutual funds.

Technology sector could also see a good time. There is a feeling that tech may be sold off because it had made huge gains during the COVID correction. Even if this were to happen, I feel that tech is a sector for all times because it is going to support many other sectors including the BFSI sector, and future development of technology including artificial intelligence.

Specialty chemicals is another area which one could be looking at.

Your advice for retail investors.

Retail investors should plan and make investments strictly on the basis of their risk profile. They should not bite more than they can chew.

They should have sound asset allocation principles in mind and accordingly deploy their monies which they invest into.

They must get their portfolio built over a period of time. They should not be making lump sum investments all the time.

They must build their portfolio by investing in a phased manner like systematic investment plans over a period of one year, two years or three years.

Instead of looking at which way the market is going they must make their commitments in a disciplined manner.

They must get their portfolios reviewed if they already have an investment portfolio to see whether there are any bad apples in their portfolio, which should be thrown out.

They should find out ways in which their portfolio yields or portfolio returns can be enhanced.

They should identify risks which are not clearly perceivable in their portfolio at the given moment, but could come into play later and try to minimise those risks.