It’s a good time to get back into the stock market, as great deals are available

THE stock market continues to worry common investors. This is especially true of those who are first-time investers in stocks, encouraged by the boom in the markets that lasted for a good four years. It was an onward march. Indeed, it gave some investors the impression that the market is a one way street. Now that the tide has turned, they can’t quite figure out what is happening in the market. Last week, the stock market barometer—the Bombay Stock Exchange's Sensex—hit a six-month low. Life below 16,000 seems to be a heavy burden for many investors. The vanishing act by the cheerleaders—the ones who were busily predicting the Sensex would be at the 50,000 level in five years—is also causing some heartburn. The most recent industrial production figures have also robbed whatever little optimism remained in the market. Are things really that bad? Is it time to cash out of the market? What strategy should common investors follow now? We turned to Kartik Jhaveri, director, Transcend Consulting, for answers. We asked him how his clients are reacting to the plunge in the market. Are they panicking? “Well, some are worried, but nobody is panicking,” he replies. What does he tell his clients to pacify them? “We have been telling our clients that what is affecting the markets now is external factors, and not internal ones—the subprime crisis and problems in the American economy. The silver lining is that our domestic economy continues to grow; corporates are reporting growth; the retail boom is still going strong. There is no change in that pattern,” says Jhaveri. He also points out that individual incomes haven’t fallen so far, as salaries continue to rise at a rapid pace. That means the consumption-led growth is poised to continue for sometime. In short, the country is still firmly on the growth path. If that convinces you to stay on in the market, we will proceed to what should be our strategy in the market. It is very simple, says Jhaveri. Start buying stocks again. Do you want to know the logic behind this? That’s simple, too: the markets have fallen pretty drastically, and many stocks are available now at very attractive prices and valuations. “I am telling my clients, who have booked profits, to reenter the market. There are some great picks available now.” He also adds that he has managed to convince his clients and bought large qantities of stocks in recent days for them. Any specific advice for retail investors, who don’t have access to experts like him? “The most important thing to do is to try to stick your original asset allocation plan. When the market has fallen so much, your equity allocation is likely to have plummeted. Rebalance your portfolio to make sure that you maintain your asset allocation,” says Jhaveri. He adds that those who have booked profits in the recent past should try to get back into the market now. He also advises investors to start thinking long-term. What you have seen in the boom period should not continue to influence you. Have realistic return expectations and start thinking seriously about investing. 'You may have accumulated quite a few dud stocks during the boom period. Try to get rid of them, and clean up your portfolio. Just remind yourself that it is the time to learn the hard way.”