Indian markets at near record levels are clearly overvalued as far as the historic Sensex p/e averages are concerned. Investors would do well to use every opportunity to sell on rally.
Corporate results have not been too great
Corporate numbers for the period ending Sept 30, 2019 have not been too good. In fact, gains in the next few quarters will largely come from the reduction in corporate tax numbers. It is unlikely that we would see growth reviving anytime soon. The problem for most of the corporates is that there remains pricing pressures. Margins are thus likely to continue to head lower, especially in spaces like FMCG.
Liquidity driving markets
It is clearly liquidity that is driving the Indian markets. In fact, in a scenario where bond yields are falling rapidly, money is likely to move into equities. Easy monetary policy around the globe is driving global markets. In fact, in the US the S&P 500 too has hit a record high, but, is unlikely to sustain at these levels.
Look for dividend yields
If anything, investors should look for companies where there is a possibility of generating good dividend yields. Remember, that dividends up to Rs 10 lakhs is exempt from tax. Some of the stocks that one could look for dividend yield include stocks like GAIL and ONGC. In fact, Gas Authority of India Limited shares are available at a dividend yield of nearly 5.6 per cent, provided the company retains the same dividend like last year. It would be a good idea to look for such stocks.
Avoid chasing high beta stocks
It's a good idea to avoid momentum plays and stick to quality. This is not a phase where companies are growing at a stupendous pace and hence any and every stock would rally. By stocks that have a proven track record and are good on dividend yield and price to book.
Even some select media stocks like Jagran Prakashan offer excellent value buying because of its dividend yield. In short, the name of the game now is quality.