How To Keep Your Portfolio Prepared Ahead Of Poll Results

Lok Sabha Elections 2014 are arguably the most important that we are witnessing as a nation in the past two decades. The stock markets have gained nearly 15% over the past month, driven by hopes of a change of the guard at the Centre, and over the next fortnight, a further rally cannot be ruled out. But in case of political shocks, the markets may tank 10-15% within no time. Are you ready to make the most of your investments in this very crucial year?

Elections are times when the markets are fraught with volatility. But the kind of volatility that the markets are now witnessing can make even the bravest heart, long-term investors quite shaky. So here are some suggestions you can use to refurbish your portfolio ahead of the poll results.

It’s time to evaluate your portfolio
Given that the markets have run up considerably over the past few weeks, your portfolio should have given you significant returns as well. But if you have not seen that much gain, perhaps your choices were not that great. Use this opportunity to sell those stocks and use the funds to build a better portfolio.

Take a sectoral call
Equity pundits think it is time to take a look at some specific sectors that may benefit after the poll results come out. This is because there will be a veritable boost in the investment cycle when a new government comes to power. Some of the sectors that may see significant upward surge post the polls are energy, infrastructure, banking and capital goods. That is not to say that sectors such as FMCG or IT will suffer, but the above mentioned sectors will benefit more from a boost in investor sentiment. Equity analysts agree that this is a good time to invest in the frontline stocks in such sectors.

Avoid the stocks that have run up significantly
The markets at large are expecting the NDA-led government to make a grand re-entry at the Centre. As a result, a number of stocks have run up and already reached their fair value. While it is okay to invest in small-cap and mid-cap stocks, make sure that your research is thorough and you are not solely banking on the euphoria.

Advice for the overcautious
A lot of people believe it is a cardinal mistake to ‘time’ the markets, but to turn away from obvious gains is being naïve. Therefore, those who have over-allocated in the fixed income and debt investments, should now re-allocate funds into equities.

Those who are prudent and astute stock-pickers, there is no better time than ‘now’ to look for sector-specific opportunities. But if you are one of those who want to take part in the rally via the safe mode, it is best to go with the funds being offered by top asset management companies who have already sniffed out opportunities and are ahead of the curve.
Rajiv Raj is the Director and Co-Founder of www.creditvidya.com
Image: ThinkStock