Gearing up for an event

Buy at dips if market corrects significantly

Timing the market and devising an exit or entry strategy around an event like an election or a monetary policy can be tricky. Markets may move either ways and more often than not you may not be able to make the right call.

Two major events are likely to dictate the course of the market this month. The first is the Delhi assembly elections and the second, the Union Budget.

The market has been playing truant in the past few days, and things are expected to get more volatile, especially if the Bharatiya Janata Party (BJP) loses the elections. Elections were held on Saturday and the results will be announced on Tuesday.

Most exit polls predict a victory for AAP. For instance, the exit poll conducted by India Today-Cicero suggests AAP coasting to a comfortable victory with 35-43 seats versus the BJP's 23-29 seats and three to five seats for the Congress. The ABP-Nielsen exit polls suggests that AAP will bag 39 seats, BJP 29 and the Congress only 3.

If BJP loses, a correction may be inevitable. So what should be the investment strategy at this point? Unfortunately, there are no hard or fast rules to base your strategy on. “If the market corrects in a big way, investors can take advantage of dips and use it as a buying opportunity,” said Amar Pandit, a certified financial planner.

“If the market reacts beyond 2-2.5 per cent then only think of buying or selling. If you want to buy, buy one that you are comfortable with. Don’t buy a stock that made a high or low on that day. Don’t buy for one or two days on this event. But for at least for 10-12 days because Budget is looming large and even the monthly expiry is near,” said Arun Kejriwal, founder, Kejriwal Research & Investment Services.

Pandit says that since the Budget is also around the corner, investors should avoid getting in and out of stocks too often as this strategy can prove risky. “If you have not made a lot of money and feel that nothing much has changed fundamentally with the stocks you own, then stay put,” said Pandit.