Puzzled retail investors try to make sense of the market’s moodswings even though long-term players stay unruffled
Madhu T TNN
These are confusing times for stock market investors. They are greeted with negative news everyday: First, it was the news of inflation touching four-year high. Next was the RBI hiking cash reserve ratio, indicating an increase in interest rates. The market is already agog with talks that a higher interest rate scenario may dent corporate profits and spoil the party at Dalal Street. However, if you go by the activities of the bulls in the market last, you would find that they are unperturbed by these negative news. How else would you explain them pushing the sensex above the 17,000 mark once again? No wonder, the common investor is puzzled about the entire thing. But the question is what are these common investors up to? Do they still remain invested in the market? Or have they taken their money out and headed for some cool-climate destination to avoid Mumbai scorching summer? “Naturally, investors are concerned about what is happening in the market. But one positive thing that has emerged this time is maturity shown by investors,” says Ghalla & Bhansali Securities director Mukesh Dedhia. “Most clients have shown amazing confidence in the market. They have full confidence in the Indian market. Some of them were saying that they are not bothered and were ready to wait for next three years for the market to bounce back.” Says a mutual fund manager: “All this noise is made by traders, but we shouldn’t be really concerned about them. As far as real investors are concerned, they are extremely confident that the market will deliver.” What sort of advice is Dedhia offering his clients these days? “I am telling them only one thing. If you want to be invested in stocks, buy every time to the market goes down. In fact, we have spelt out our strategy that 2008-2009 is accumulation year. You will have great opportunities to buy stocks at attractive valuations,” he says. But I hasten to add that one should buy only quality stocks. In fact, I have told my clients sitting on cash that they should buy stock every trading day through the whole year.” He says, “The problems facing the market such as elections in the US and India and global economic troubles won’t be solved immediately. The market will take some time to consolidate, one should make good use of the opportunity.” Says a certified financial planner: “We are also telling our clients to park m o n e y which they don’t need for at least a couple of years. Otherwise, we are asking them to book profit and park the money elsewhere.” Dedhia says it is time for people to think about diversification of the portfolio. “They should have negatively correlated assets such as gold in their portfolio. This type of diversification always helps,” he says. “People can buy gold even at today’s price, as the gold prices are likely to go up further. Worldover, central banks are started accumulated gold due to weaker US dollar. This will keep the gold prices up,” he adds. Dedhia also says that it is time for people to consider investing in debt instruments considering the possibility of an interest rate hike. “When the interest rates go up, debt schemes would start performing well. So, once can consider investing some part of the money in debt,” he says. Experts like Dedhia aver that it is still safe to invest in equity if you want to make money, but you have slowly accumulate good quality stocks for that. “If people have money, they can still look at equity. But the only difference is that they have to be very careful about the kind of stocks they are adding to their portfolio,” says the financial planner. “Earlier, every stock was going up. However, that is unlikely to happen now. The market will reward only quality stocks. Others will be severely punished,” he adds.
Madhu T TNN
These are confusing times for stock market investors. They are greeted with negative news everyday: First, it was the news of inflation touching four-year high. Next was the RBI hiking cash reserve ratio, indicating an increase in interest rates. The market is already agog with talks that a higher interest rate scenario may dent corporate profits and spoil the party at Dalal Street. However, if you go by the activities of the bulls in the market last, you would find that they are unperturbed by these negative news. How else would you explain them pushing the sensex above the 17,000 mark once again? No wonder, the common investor is puzzled about the entire thing. But the question is what are these common investors up to? Do they still remain invested in the market? Or have they taken their money out and headed for some cool-climate destination to avoid Mumbai scorching summer? “Naturally, investors are concerned about what is happening in the market. But one positive thing that has emerged this time is maturity shown by investors,” says Ghalla & Bhansali Securities director Mukesh Dedhia. “Most clients have shown amazing confidence in the market. They have full confidence in the Indian market. Some of them were saying that they are not bothered and were ready to wait for next three years for the market to bounce back.” Says a mutual fund manager: “All this noise is made by traders, but we shouldn’t be really concerned about them. As far as real investors are concerned, they are extremely confident that the market will deliver.” What sort of advice is Dedhia offering his clients these days? “I am telling them only one thing. If you want to be invested in stocks, buy every time to the market goes down. In fact, we have spelt out our strategy that 2008-2009 is accumulation year. You will have great opportunities to buy stocks at attractive valuations,” he says. But I hasten to add that one should buy only quality stocks. In fact, I have told my clients sitting on cash that they should buy stock every trading day through the whole year.” He says, “The problems facing the market such as elections in the US and India and global economic troubles won’t be solved immediately. The market will take some time to consolidate, one should make good use of the opportunity.” Says a certified financial planner: “We are also telling our clients to park m o n e y which they don’t need for at least a couple of years. Otherwise, we are asking them to book profit and park the money elsewhere.” Dedhia says it is time for people to think about diversification of the portfolio. “They should have negatively correlated assets such as gold in their portfolio. This type of diversification always helps,” he says. “People can buy gold even at today’s price, as the gold prices are likely to go up further. Worldover, central banks are started accumulated gold due to weaker US dollar. This will keep the gold prices up,” he adds. Dedhia also says that it is time for people to consider investing in debt instruments considering the possibility of an interest rate hike. “When the interest rates go up, debt schemes would start performing well. So, once can consider investing some part of the money in debt,” he says. Experts like Dedhia aver that it is still safe to invest in equity if you want to make money, but you have slowly accumulate good quality stocks for that. “If people have money, they can still look at equity. But the only difference is that they have to be very careful about the kind of stocks they are adding to their portfolio,” says the financial planner. “Earlier, every stock was going up. However, that is unlikely to happen now. The market will reward only quality stocks. Others will be severely punished,” he adds.
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