Vote For Large Caps In The Poll Year

- M. Rajendran

Historically, equity markets have always shown a bullish trend immediately after elections. This trend has prevailed since the last four general elections.

As predicted, even this time, the mutual fund sector is at an all-time low and is going to get even worse with the election dates nearing. However, signs of what is in store were visible when the markets revived by a few notches immediately after state poll results were declared late last December.

However amidst all this instability, analysts pointed out, large-cap companies have always shown comparatively lesser volatility and their valuations have remained relatively reasonable over different market cycles, making it an all season choice even during the election year.

Devang Mehta, Head - Equity Advisory, Centrum Wealth Management, highlighted that election years bring along a lot of volatility, making the markets nervous more often than not. Hence, most participants prefer large caps, especially the bluest of blue chips, which are market leaders across sectors and already have great businesses. “However, the volatility has to be used to one’s advantage for picking great companies across the market cap spectrum to build a robust portfolio,” added Mehta.

His views are supported by Anuj Shah, Head-PCG, Reliance Securities, who said, “Stick to large cap as they reflect the broader market and sentiment.”

With the recent tapering down of the domestic retail money inflows, barring the monthly SIP inflows which continue to clock up every month, it is likely that the Foreign Institutional Investors (FIIs) will keep away from the event-driven election volatility.