Stock Portfolio Management: After the outbreak of the Russo-Ukraine War on 24 February 2022, stock markets around the world crashed. After more than four-and-a-half months of geopolitical tensions, equity markets are yet to fully recover. On Dalal Street, major benchmark indices (BSE Sensex and NSE Nifty) are down nearly 9 per cent year-on-year, causing huge losses in investors’ stock portfolios as a good number of stocks entered a fresh 52-week low. Low in recent sell-off. Thus, it is important for an equity investor to rebuild his stock portfolio.
speaking on one’s way of rebuilding stock portfolio After such a huge stock market crash, Mayur Shah, PMS Fund Manager, Anand Rathi Advisors said, “When markets are hitting new highs it is difficult to identify better value stocks as everything trades at fair or premium valuations. It is also difficult to predict future challenges and risks. When the market corrects, and if you follow a wait and watch policy, there can be chances of dead stock accumulated in the portfolio, which can lead to poor performance. Your portfolio may have fallen with corrections, but to outperform the market when market growth is very important. Weak markets provide the best opportunity to optimize stock portfolio.”
What the Stock Portfolio Management Manual Says
On how investors can manage their stock portfolios in the wake of such a huge downturn in the equity market, Richa Agarwal, Senior Research Analyst, Equitymaster, said, “Instead of anticipating or timing the volatility in the market and stock prices, It helps to walk by the rule book that has worked in cycles and to have a long-term horizon. Over the long term, valuations reflect business fundamentals, and most macro concerns end up as noise.”
Richa further said that money and liquidity in business is no substitute for prudent capital allocation. And that’s where the quality of management comes in. Long term investing is like partnering with the management of the companies in which you invest. So they need to cut down not only on the intelligence and execution aspects, but also on integrity.
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Sharing an ideal strategy to rebuild your stock portfolio after such a prolonged slump in the equity market, Rahul Shah – Co-Head of Research, Equitymaster said, “This is one of those difficult environments where there is no clear direction. No. Absence of any positives. Triggers are keeping traders on tenterhooks and long-term investors don’t want to jump in either because valuations aren’t extremely attractive yet. The best strategy right now is to do something on either side line Be it cash or keep buying fundamentally strong stocks in a phased manner, something like SIP.”
Unveiling the strategy to rebuild your stock portfolio after a major downturn in the stock market, Mayur Shah of Anand Rathi Advisors listed the following five lessons for stock investors:
1]Identify the challenges/risks in the market that have led to the downtrend;
2]identify sectors and related stocks that are more vulnerable to these challenges and which are not;
3]Exit stocks whose medium to long term profitability may fall due to these challenges;
4]Invest in stocks that are not affected by current challenges and are available at a better price due to the correction that you could not buy because of premium valuations; And
5]There is a need for proactive management and one may incur losses to make the overall portfolio look good.
Disclaimer: The views and recommendations given above are those of individual analysts or broking companies and not of Mint.
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