scorecardresearch
Nirmal Jain's important investment advice for retail investors

Nirmal Jain's important investment advice for retail investors

Retail investors should stick to largecap stocks or mutual funds, says Nirmal Jain of IIFL, adding that e-commerce firms are high-risk high-reward game and one should be cautious.

Jain says investors should approach stocks of e-commerce companies with caution since stocks of the new-age sector are mostly "high-risk high-reward" in nature. Jain says investors should approach stocks of e-commerce companies with caution since stocks of the new-age sector are mostly "high-risk high-reward" in nature.

The last one year or so has seen the valuations of companies across segments -- largecap, midcap and smallcap -- go through the roof, and while the word 'correction' is being said in hushed tones across the market for quite some time, it has never really happened in a significant manner.

Any intermittent fall was quickly recouped and new record highs were registered. Meanwhile, the last two trading sessions saw the S&P BSE Sensex shedding more than 1,800 points, with the net weekly loss pegged at 1,515 points and the buzz of an impending correction has again gained traction.

This assumes significance as the market is replete with new investors who have been taking exposure across segments, including the riskier midcap and smallcap arena and the more riskier penny stock space.

Nirmal Jain, chairman of IIFL and a market veteran of nearly three decades, believes that given the overall market volatility, it is best for retail investors to stick to well-known, fundamentally strong companies or mutual funds instead of lesser-known stocks to make a quick buck.

"For small investors and retail investors, it makes sense to stick to the largecap liquid stocks or very well-known mutual funds and not get into individual stocks unless you understand the stock very well, you know the company and you want to hold the stock for a long time. If all these conditions are met, only then you should try or else you are safer with the largecaps or mutual funds," he said.

Also Read: Big IPO rush: Five cos set to go public in first half of November; seek to raise over Rs 27,000 crore

In the last six months, the benchmark Sensex has risen by nearly 22 per cent, while the BSE smallcap index has outperformed with a gain of a little over 27 per cent. In the last one month, however, the Sensex is up nearly 1 per cent, while the BSE smallcap is down nearly 1 per cent.

Approach e-commerce companies with caution

Interestingly, the IIFL honcho is also of the view that investors should approach e-commerce companies with caution since stocks of the new-age sector are mostly "high-risk high-reward" in nature.

"With great caution and understanding that it is a high-risk high reward game," he said, when asked how should investors view initial public offers (IPOs) of e-commerce companies.

"The fact of the matter is that all these new companies that are going public, some will do well and some might not survive also. It could happen after five years or 10 years. Some of them may be multibagger. So, from an investor point of view, this is a high-risk high-reward game," said Jain.

"So, don't put all your money there but if you want to play the market, you are willing to take the risk then yes, otherwise avoid. If your appetite for risk is good and you are ok with high-risk high-reward (approach) then there are lot of opportunities now," he added.

The near future will see a slew of IPOs by companies from the start-up space. The IPO of Nykaa will be closing on Monday, while the public issue of PB Fintech (Policybazaar) will open for subscription. The week after, the IPO of One97 Communications (PayTM) will be open for public to bid.

Also Read: Crop insurance claims for 2020-21 fall by over 60% YoY to Rs 9,570 crore