Say goodbye to risky bets; time to sanitise your portfolio

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The markets are on an uptrend. The Sensex hit its all-time high of 53,290 on July 16. As market valuations turn expensive, there is every possibility of a correction on a negative news. The case in point — the 1,000-point correction in two days earlier this week on fears of third wave of Covid-19. Experts say this is the right time to sanitise your portfolio – saying good-bye to risky bets, which may or may not have rewarded you, and sticking to quality names.

“There’s no directional move in the market yet. The recent selling pressure is mainly due to weak global cues as well as concern over the fast-spreading Delta variant. Besides, the beginning of the earnings season is also not very encouraging so far,” said Ajit Mishra, VP Research, Religare Broking.

Even though Mishra feels investors should continue to hold and accumulate fundamentally sound stocks on dips, he has an advice for those invested in penny stocks.

“One should not read much into the short-term whipsaws. However, those who are holding penny stocks in their portfolio or stocks which have been consistently underperforming should try and exit as the reaction could be severe in case this decline extends further,” he said.

Getting started

It is never a good idea to sell all holdings in one go and one should book profits partially. Filter out stocks that have risen exponentially and give a thorough research to the stock and the sector as a whole.

“We have to see which stocks have seen maximum profit. Based on the exclusive research done on that sector, and if the sector is doing well then we can hold on, otherwise we can book profit and sell it. Even in particular stocks, you can sell it in small lots and different scrips can be sold based on your research depending upon the quantity. However, there should be no dumping of stocks and they should not be sold altogether. Dumping of stocks will not yield favourable results and any upside cannot be taken,” said S Ravi, Former Chairman of Bombay Stock Exchange.

Automated tool

Samco Securities has created a tool — Portfolio Quality Score – that divides an investor’s holdings into two sections — i) stocks that are strong (good quality businesses), and ii) stocks that need your attention (poor quality businesses)

“The client can switch their poor-quality stocks in two clicks to an expert-created portfolio of great businesses available on StockBasket, where we provide managed portfolios. This SmartSwitch helps eliminate poor-quality stocks that are making the portfolio weak and destroying wealth,” said Paras Matalia, Head of StockBasket at Samco Securities.

However, there is no substitute to your own research. Apps may help you to some extent, but ultimately your own study will benefit you the most.

“A thorough research should be given priority before deciding on the portfolio. There may be applications in the market that can provide recommendations but they are not the most prudent. Rather than using apps, it is advisable to do one’s homework in the market as there is a facility of direct selling,” said S Ravi.

Take action now. As benchmark indices hover near record highs, time to bid adieu to the stocks that have seen abrupt rallies.