Which Stocks Should You Buy After A Market Correction?

Which stocks should investors buy after a market correction? Answer: The ones that performed well before the market declined and lagged when it fell.

This strategy has resulted in outperformance in 13 of past 16 times that BSE 200 Index dropped less than 20 percent, according to Goldman Sachs.

The international brokerage says the 'Winners+Laggards' strategy has:

• Outperformed the index by an average of 7 percent over a three-month period.
• Long/short holdings of such stocks delivered better returns than other investment strategies.

“Markets have typically not rewarded factors based on fundamental styles such as buying high ROE (return on equity) stocks or buying companies with high-quality earnings growth.”

Indian equities have corrected over 10 percent after hitting their peaks in January spooked by a global sell-off and re-introduction of a long-term capital gains tax locally.

The current downturn is a "trading correction" as macro data, earnings are improving, Goldman Sachs analysts led by Nitin Chanduka wrote in a note Monday.

The brokerage said investors may look at ICICI Bank and TVS Motor as conviction buys. Its other picks include Motherson Sumi, Container Corp. and JSW Energy.

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