Making money from stocks is increasingly becoming a huge struggle. The index is at 38,000 points, thanks to a few stocks like Reliance Industries, TCS, Infosys and HDFC Bank.
The problem with the Indian markets is that a few stocks like those mentioned above go up, the Nifty goes higher, while many stocks are either falling or barely move.
Heavy weightage of a few stocks
At the moment HDFC Bank commands a weightage of 11 per cent in the Nifty, followed by Reliance of nearly 10 per cent and HDFC of 7 per cent and Infosys near 6.5 per cent. Together just 4 stocks command 35 per cent weight of the Nifty, which has 50 stocks.
So, if these 4 stocks trend higher, the markets move higher. This is exactly what has happened in the last few days. Just these 4 stocks have taken the Nifty to near record levels, while the broader markets are languishing.
In fact, most other stocks from the Nifty including Tata Motors, Vedanta, India Bulls Housing, Tata Steel, Hindalco etc., are sharply lower from their 52-week highs. Some of these are down a good 20 to 40 per cent from peak levels.
Investors remain trapped
Many investors are trapped at higher levels and are unable to exit. Several good quality names like HEG, Graphite India, Apex, Avanti Feeds, IndiaBulls Housing, Sadhbhav Engineering have nearly halved in value, as midcaps and small cap stocks have plunged. It is unlikely that these stocks would recover anytime soon. The hope for investors now is positive news on the election front, which may take mid and small cap substantially higher from these levels.
However, if the election results are not up to the mark, one is not sure when some of the stocks would recover.
Book profits at every level
It is advisable that at every rally one books profits. Of course, that would arise when you have made money. Midcaps and small caps have been such a trap, that many investors would not have made money.
Some investors would be happy, if they can hold and recover their losses at least to a larger extent.