General Elections 2024: An upmove seems more likely than a correction ahead of polls, says Shauryam Gupta of Rupeezy

Shauryam Gupta, CEO - Rupeezy, believes that given that the market has factored in the prevailing political climate, an upmove seems more probable than a market correction ahead of elections. Moreover, the market expert also advises investors to rebalance their portfolios towards large-cap stocks, which currently offer more compelling valuations than mid and smallcaps. 

Edited Excerpts:

Do you see a correction in the market ahead of elections?

More than elections, the inflation data and the impending rate cuts will have a major impact on the markets. Unfavorable macroeconomic indicators may bring a correction in the market. However, it's worth noting that the market appears to have already factored in the prevailing political climate. Given this context, an upmove seems more probable than a market correction at this juncture.

Read here: Expert view: Expect moderate gains in 6-12 months; General Election key trigger

Do you see another rally in mid and smallcaps ahead of elections?

The small and mid-cap indices have corrected over 15 and 9 percent respectively, in the last month. Now this correction appears to be bottoming out. For a rally to happen in this space, a lot depends on the macroeconomic factors, especially the inflation data.

Do you advise investors to move to largecaps now?

The risks in the small and midcaps have significantly increased owing to the debate of “froth” building up in the space. Several small-cap stocks have surged to lofty valuations, potentially outpacing their underlying financial performance. Given these heightened risks, investors may find it prudent to rebalance their portfolios towards large-cap stocks, which currently offer more compelling valuations.

Read here: Don't expect fantastic returns from small cap segment going forward: Jimeet Modi

How should investors position their portfolios ahead of elections?

The general elections are a major event with a significant impact on the markets, often accompanied by heightened volatility and considerable risks. In light of this, investors are advised to prioritise diligent risk management over the pursuit of high returns. It's prudent to allocate investments cautiously, favoring safer and less volatile stocks to navigate through this period.

Do you expect a surge in FPI inflows around the elections?

After huge selling in the first two months of the year, the FIIs have finally turned net buyers in the cash market in March. The jitteriness and anxiety surrounding the elections may elicit some profit booking. Given the circumstances, I don’t see much FPI inflows happening around the elections.

Read here: A 10-15% correction may be healthy: Varun Fatehpuria

Are there any contra-buy sectors you would advise investing in?

My contra-buy sectors would be green energy and PSU stocks. The recent correction in the market has significantly dragged down the stocks in these sectors. I believe these sectors have huge growth potential in the coming days in India.

What is your view on IT? Overweight or underweight?

It is time to go overweight on IT stocks. The IT sector was the last mover after the rate hikes and the IT index is yet to go past its all-time high level. A low-interest-rate environment typically has a disproportionately positive impact on tech stocks, given their classification as growth-oriented companies.

Read here: The sweet spot lies in the mid-caps, says Niket Shah of Motilal Oswal

Do you expect PSU stocks to continue rising or is there a correction in the near term?

The PSU stocks are expected to continue their rising trend. The highlight in the PSU space would be banks and financials, energy, and metals.

Would there be a pre-election rally this time or election results are mostly factored in?

I would say the election results are factored in. Going by the previous two election-year trends, we may get to see a pre-election rally but that should peak around the end of April.

One piece of advice for new investors?

New investors enter the market with exuberance seeing the stories of lofty returns. My advice to them would be to prioritise learning proper risk management techniques, understanding market psychology, and acquiring comprehensive knowledge before diving in. It's essential for them to have a clear understanding of the stocks they're investing in and the associated risks.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.