The Indian stock market is continuously making news these days as it has been able to hold on fairly well even when the global stock markets are suffering badly. What is the reason behind this? Many experts believe that improved corporate earning and strong gross domestic product (GDP) growth have contributed to this success and an above par performance. So, if you wish to trade in this highly profitable market, here are some helpful tips to get you started.
Trade in Bank and Financial Stocks
The quarterly and yearly results of banks indicate that the Indian banking sector is performing increasingly well. The stocks are registering new highs because banks performed reasonably even during the recent depressive situation caused by the American economy. The financial services sector has also recovered after the economic recession, and hence, it can be considered a safe bet.
Identify Quality Mid Cap Stocks
The large cap stocks in the Indian stock market are showing signs of exhaustion, and have not run up since a few months. So, why not shift your focus towards the mid caps which are doing quite well? However, mid cap stocks can fall sharply, and hence, you should choose quality mid caps which have a sound business model and good performance history.
Look Out for Pharma Stocks
Indian pharmaceutical companies are doing very well with overseas acquisitions, introducing medicines and tablets in the US markets, and expanding the ever growing domestic business. Pharma companies are not affected by global meltdown or other factors such as interest rate hikes. So, choose good quality ones for great value creation.
Be Cautious About the Incoming News on Stocks
You need to cautiously trade the stocks which have some good or bad news coming in. Generally, the Indian stock market shows nervousness on acquisitions made with huge amount of cash and large equity dilution. So, in such cases, stock prices can get hammered. On the other hand, stake sale in companies generally creates a great interest in the Indian markets, if the sale of shares comes at a premium to the current market price.
Trade High Beta Stocks
If you wish to become a successful trader in the Indian equity market, you would need to trade the high beta stocks. Keep proper stop losses and wait for some ambitious price targets in these stocks. Do not panic if the price starts falling, and invest in infrastructure stocks in the mid cap space for high returns.
Sit on Cash in a Falling Market
If the market falls consistently breaking all the support below, liquidate all your positions and sit on cash until they find support on the lower levels. Wait for the right opportunity to buy the right kind of stocks. Study the technical charts carefully before you buy anything.
Check the FII Moves
The Indian stock market depends largely on the money coming from foreign institutional investors (FIIs). If you find that FII exposure has increased, then you might consider selective buying in some stocks.
These suggestions can help you trade in the Indian markets easily. Also, conduct stock research yourself for better returns in the time to come. Al the best!
DISCLAIMER: This article is just for reference purposes, and does not recommend any stock market transactions.