Riding the market swing

Retail investors, who were expected to make a beeline to the exits when the markets crashed, stayed put and actually considered cherry-picking.

Print Edition: February 21, 2008

It's strange but true. The only panic was from the media when the markets crashed in the third week of January. Retail investors, who were expected to make a beeline to the exits, stayed put and actually considered cherry-picking. Obviously, the Indian investor has come of age. On the face of it, it appears that foreign institutional investors (FIIs) were the ones who jumped the gun by turning net sellers in a big way.

As a small investor, you might wonder if it makes sense to follow this movement out of the market. We examine why exactly FIIs left the market and what you should do. We explain why it makes sense for you to stick on in light of the India growth story.

Riding the market swing

Of course the markets claimed some victims. This time around, the ones who lost their shirts in the crash were small players in the futures and options (F&O) market. The manager of our model portfolios, Dipen Sheth has said it often enough, and says again that F&O in the hands of small investors is like a grenade in a monkey's hands. There's no telling what will be done to it to make it go off with a spectacular bang—in the holder's face.

We also take a look at what F&O players should look out for, if they must play this market. And finally, we ask some brokers to stick their necks out and recommend some crash-resistant stocks. After all, there's no point saying “Buy” if you don't know what to buy. If you want to make your own picks, don't look only at stock price; we took a look at corporate India's third quarter results to examine growth in value. Read on to see how you can make the most of this market.

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