Navigating a volatile market is a challenge that even seasoned investors face and at this time, when the market has too many headwinds and the clouds of uncertainty are thick, it is even more challenging for new investors.
In the last one month, the equity benchmark Sensex has seen strong volatility. After hitting a 52-week low of 50,921.22 on June 17 this year, the market benchmark reclaimed the 60,000 mark in August but now has again slipped below this psychologically important level. At this point in time, the Sensex is 4% down from its all-time high of 62,245.43 which it hit on October 19, 2021.
There is much uncertainty as to how the market will perform in the near term. Even as most variables are on the table, the market reacts to the macroeconomic indicators and fresh cues about the trajectory of rate hikes.
Most analysts have a cautious view of the market for the short term and they advise avoiding aggressive buying before the dust settles on rate hikes and a looming recession in the US and other major economies.
However, avoiding aggressive buying does not mean staying away from the market. In fact, analysts say buying on dips would be beneficial because of the positive long-term outlook of the Indian market.
A majority of analysts believe the Indian market may outperform its major peers this year because of its economic growth and support from retail investors.
India's economy appears to be on a strong footing compared to that of the US and China.
"India seems to be enjoying the TINA (there is no alternative) factor, as globally all countries are facing the churn and India seems to be the best-placed jurisdiction in terms of growth and inflation outlook in FY23. We share such
optimism as China is also facing a bleak outlook on the back of a construction sector meltdown. In fact, we believe the China story may now be facing clear headwinds and India is likely to benefit from such stark realities over the longer term," SBI Research said in a report.
What should new investors do?
Analysts advise new investors should stick to basics. Avoid timing the market, buy quality stocks on dips and do research before investing in stocks, they say.
They point out that the dust around the rate hikes will be over in the next one year or so and the equity market will see a healthy upward movement in the long term.
"New investors should keep buying on every dip; a mix of large and small caps with at least a one-year investment horizon. Within a year, the cycle of monetary policy reversal would be over in the world including in India. India’s GDP growth and corporate earnings streams would lead to a robust outlook for the Indian markets in the medium to long term," said G. Chokkalingam, Founder & Head of Research, Equinomics Research & Advisory.
Ramkumar Venkatramani, Lead - Investment Advisory, Kristal.AI is of the view that new investors should systematically buy at dips and cost average.
He pointed out that waiting for entry points could result in substantial opportunity costs. For those who don't have time to track the market, Venkatramani believes it is better they go for market-neutral strategies.
"Alternative funds and life settlement funds can offer much-needed protection from volatility in these times," said Venkatramani.
Disclaimer: The views and recommendations are those of individual analysts or broking firms, not MintGenie.