YES Bank, JP Associates, Vodafone Idea: Mitesh Panchal flags retailers' biggest trading mistake

Sebi-registered analyst Mitesh Panchal has flagged averaging down as the biggest mistake retail investors make in small-ticket and high-beta stocks such as YES Bank, Vodafone Idea Ltd and JP Associates Ltd (Jaiprakash Associates Ltd).

"Stocks like YES Bank, Vodafone Idea or JP Associates, or any small-ticket stock, are easy to enter but difficult to exit. Now there are two ways you should approach this. First of all, I have bought YES Bank at Rs 50, 33, 35, whatever, right? What should I do? The only thing you should do is please wait patiently," Panchal told Business Today.

He said retail participants should avoid averaging down positions. "Do not average any stock that has fallen 50–70 per cent in your portfolio. When the tide is turning, if you are a high-risk trader and want to participate, follow strict stop-loss discipline. Otherwise, avoid such stocks," the market expert said.

According to him, investors can approach such counters with two mindsets. "One is with strict stop-loss discipline, which is rare to follow. The second is, if you are stuck at a high level, wait patiently. Once prices come back, exit and move on," he said.

Panchal further stressed that investors should not always expect to recover every loss. "If I got stuck at Rs 35 years back and even if Rs 30–32 levels come, I should book partial loss and get out. Never think the market will always give you a chance to fully recover. Somewhere you'll have to take that pinch of 5–10 per cent," he explained.

He noted that booking losses releases fresh capital. "At Rs 100, if you are stuck and you book at Rs 80, that Rs 80 is capital in hand. You can deploy it elsewhere and recover that Rs 20. Don't make it a habit to try recovering everything from a single stock," he said.

On the market outlook, Panchal said Nifty50 is gradually heading towards the 25,500 mark. "This week, if we close above 25,500, it will give a strong signal that around Deepawali we may see lifetime highs," he added.