Samvat 2075 is just around the corner. For those who don’t know, Samvat or Vikram Samvat is a Vedic calendar which is different from the English calendar. For many Hindu investors, Samvat marks an auspicious moment and they take big bets to invest. Samvat year begins on the Diwali day. This is a time when many market experts and brokerages come out with their 'Samvat 2075' and 'Muhurat 2075' stock picks, usually 10-12 in number. But should you invest based on these picks? Let us look in detail.
Samvat and Muhurat stock picks are usually with 1-year time-frame. The Muhurat trading session is conducted for 75 minutes on Diwali day on leading bourses to pay obeisance to Lakshmi, the Hindu goddess of wealth and prosperity. It also marks the New Year for traders as per the Hindu calendar, or Samvat. Usually a week or 10 days in advance, stock market experts and brokerages come up with their own list of preferred stocks that are expected to do well. These stock picks are recommendations. So, all the standard precautions should be applied before investing.
Overall market mood key for success
The overall market outlook will be very important for stock picks to succeed. Unless you have stocks that move directionally opposite to the market, all stock picks have their fortunes linked to the overall sentiment. Many brokerages came up with Muhurat picks in 2017, but the portfolio hasn't performed well because markets have turned negative.
Will 2018 be any different? There is a lot of data to show that elections don't matter for stock markets if you hold for the long-term i.e the full tenure of the government etc. But, if your trading window is smaller i.e. one year, then big events during the phase can affect your stock/portfolio returns in either a positive or negative way.
Going forward, we have a politically heavy calendar starting with 5 state polls in November-December 2018. The big election i.e Lok Sabha election is slated for somewhere in April-May 2019. Usually, markets try to anticipate the outcome of Lok Sabha polls and that is how they start moving. For instance, ahead of 2014 polls, markets had bet on BJP victory and when this proved to be true, markets were overjoyed. In 2018, markets are undecided on the outcome. If the state polls show a trend and that trend is not in line with market expectations, there will be volatility and correction. If the state polls show a trend that is liked by markets, expect a relief rally. Otherwise, it will be a range-bound market till the 2019 big election.
Evergreen stock picks
Samvat and Muhurat stock picks are carefully chosen by all experts and brokerages. Extra care is taken. This is because such picks are heavily promoted and any small error or wrong stock selection can bring bad name. But, that doesn’t mean all stock picks work. In fact, some data analysis shows 6 out 10 stocks picks work in bull markets. This means there is always the chance of 3-4 stock picks that may not do as well. There is no way to find out which picks will work and which won’t.
However, one can safely assume that stock picks linked to domestic consumption will do well. What are the domestic consumption picks? These will be stocks of companies that are reliant on Indian growth story. For example, commercial vehicles and automobiles, loans (banks, NBFCs), pharmaceuticals, fast moving consumer goods (FMCG), retail etc.
Many Samvat and Muhurat stocks picks are not new. These stock picks represent the high-conviction calls that analysts and experts think. It is important to not go into small and midcap stocks, no matter what their target price and return potential. The Indian markets are going through a high volatility phase. Small and midcap stocks are more volatile than the average market; so they will likely to move down and up more than the market. Unless you have a 5-10 year horizon, avoid small and midcap stock picks. Let the dust settle.
Strength of stock team giving recommendations
During events like Samvat and Muhurat, all types of experts and brokerages come up with their own list of stock recommendations. It is important to assess who is recommending. Would you buy a TV from Bill Gates? Would you buy cement if Jet Airways sold it? Would you take medical advice from your driver? The answer is No.
It is important to take advice from qualified people. Not everybody giving stock recommendations and advice is a real expert. When it comes to taking Samvat and Muhurat trading picks, look at the strength of the analyst team, the time covering the stock, their previous track-record etc.
A stock recommendation represents a call about a security. For the investor, it is real money. You can win or you can lose. So, it is important to take the recommendation from the right people. Try to understand the stock thesis. If you do not agree with the stock investment rationale, do not become greedy and do not invest just based on return potential.
Since Samvat and Muhurat stock picks come 7-10 days before Diwali, you can read the recommendations properly and take a studied call before investing.
The author is a financial journalist with over 13 years of experience