Watch: Experts advise small investors to stay cautious as share markets could see a correction soon

Mumbai: India's share market gained over 5 percent in the last one month. The rally in the markets has been largely driven by foreign fund inflows by FIIs, favorable domestic macroeconomic indicators, and positive first-quarter results by some market heavyweights. In view of the supercharged market, experts are advising small investors to avoid investing in mid-cap, and small shares trading at very high multiples.

"As far as investors are concerned I think it's a time to be cautious, one should invest in case he really wants to invest in a staggered manner I think in the next couple of months or two-three months." Sharad Chandra Shukla, Director, Mehta Equities LMT said. Market experts observe that both the Sensex and Nifty are trading at a multiple that is at a premium to the historical average.

Foreign Institutional investors have invested around Rs 85 thousand crores in the markets in the current financial year starting from April 1st. In this situation, experts advise small investors to remain invested in the markets and continue with SIPs or Systematic Investment Plans. The strategy, they say, should be to buy good stocks at dips.

"The strategy should be simple it should be a buy-on decline strategy in the market, and any decline should be used to buy into the market. Don't stop your SIPs, many people are having a view that markets are on top, so let's redeem our SIPsy. So, that should not be the view, you should be with your SIPs, you should be with your mutual funds," Arun Mantri, a market expert said. 

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"Here the retail investor can get trapped, so my advice to retail investors is that if you understand the market completely, if you understand the fundamental technical analysis, then you can trade. But apart from that, if you are investing, invest whenever the market takes a correction. Invest little by little, invest like it is done," Sharad Kohli, a market expert said. 

The markets are moving uni-dimensionally for quite some time with some minor dips like the one that happened on Friday. Investors should understand the up and down cycle of the market, while taking positions in different shares and be ready for a correction in the near future according to experts. (PTI)