Falling Stock Market - Wait or Invest ?

I'll refer to a couple of articles which I read here and there, as I write this one. One of them sarcastically saying "Saare Zameen Par". The similarity between the movie - "Taare Zameen Par" and the stock market is that both made an impact on people whosoever was involved, albeit the movie did a nice business in theaters and the stock market plunged in tandem with the world markets. Seen what happened to the market last week no one will possibly like to invest ones hard earned money in the market.

"Whether I should or I should not?" is what comes to mind when one sees falling stock prices. I was going thru a post on one of my friend's blog which said "Buy a stock when it is hitting 52 week low or just going with your instinct to put some amount to contribute an iota to the company and keep fingers crossed to get good benefit out of it". Well that sounds like a good plan. Actually reading it I felt very good coz atleast he has a plan, when most of us just keep thinking and finally end up saying to the buoyant market "Wish I had invested that time". But how does one decide if the bad days for market are over or for that matter for the stock in which one is planning to invest. The prudent thing in a falling market will be to stay away and not try to catch falling knives if one is a novice in the market.

Let me first talk about stocks hitting 52 week low my friend mentioned. There is always a tendency in the market that the stocks that hit their 52 week low may go on hitting further lows. But they may rebound as well. So incase you want to invest in a stock that is on a 52 week low see what kind of stock it is - is it a blue chip stock or large cap or one of the sectors you know is going to rebound very quick. For example if we take the current market condition most of the IT stocks are at their 52 week lows. The rising Rupee against Dollar and then the falling market has done the damage. In long run IT stocks are going to perform well but it may take time before the sector as a whole rebounds. But my suggestion - Buy IT stocks , especially TCS where the valuations look good.

Stocks which have their price per stock less that 10 or close to 10 are called penny stocks. Whenever market plunges one should refrain from investing money in penny stocks. The trigger that caused a rally in a penny stock last time may not happen again and penny stocks see very less or no movement at times.

Whenever there is a crash in the market one should try and invest money in large caps which are first to recover every time market bounces. So if you have a large cap stock which you see is strong on fundamentals go and buy at every dip. I'll take the example of large caps like ABB, L&T and Reliance Industries.

In the mid cap space look out for specific stocks catering to niche areas and the fundamentals for which seem strong and one has already seen a momentum in the stocks. The stocks of the likes of GMR Infra, Unitech, Punj Lloyd, Orbit Corporation are good buys at every dip. People who plan to go long with their investments in stock market should target stocks which will be multibaggers in coming days. RPL, RNRL should be picked at dips.

The overall picture of Indian Stock Market looks good. But once the market plunges, no one really knows how much time it will take to really bounce back. Market movement is going to be directed by global markets but India being a lucrative market for FIIs will bounce back at every available opportunity. So folks, don't miss to be a part of next rebound and make some clean money. For sure making money was never easy !!!