It's time to start nibbling on stocks

The Union Budget seemed just the excuse the market needed to explain dimming investor sentiment. A few weeks ago, the 15000 peak looked very much within reach, but rising inflation and interest rates were the clouds gathering on the horizon. Two weeks later, the Sensex corrected 13% from its highs; it was down around 6% in the past week and there is gloom on the Street once more.

However, there’s some good news after a long time. Headline inflation is down at 6.05% and if it falls further this week, some of the pressure on the market will ease. Growth continues to be strong with the economy growing at 9% for the current year and it is expected to clock 9.2% next year.

All that has changed is the absence of a clear catalyst for the market, or ‘price triggers’, as market players prefer to call them. The Budget was a major potential trigger that backfired. An overbought market did not help matters much.

This is the opportunity that you may have been saving up for. Now is the time to start nibbling on some stocks in the market. There are some good stories out there waiting to be picked.

We stress on bottom-up stock-picking in a market that’s largely been hit on macro concerns, that too, global. The days of buying into a sector are possibly over, as investors who have done that, like in real estate stocks, have borne the brunt of the fall. It makes sense to cherry-pick your stocks well.

Some contrarian stock-picking won’t hurt. As an illustration, Hero Honda is under siege; its margins are falling and it’s losing share to Bajaj Auto. With a low P/E of 11 and its stock price near its 52-week low, is the worst over for the stock?

Meanwhile, Indian Bank was listed above its IPO price even in this market, indicating that demand for the stock remains strong. The quality of management and its healthy operating parameters still inspire investor confidence. Are there more such stocks in the market?

Hindustan Zinc (HZL) has corrected by about 25% since the start of the year. The fundamental zinc story remains strong as demand for China is forecast to be firm. Will HZL’s share price recover at some time? These are the questions for which you need to find answers to discover investment ideas. The message is that things have changed in the world, and that includes the price of equity.