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Why aren't you panicky?

Anxious not worried. That describes the state of most stock market investors. We spoke to a few retail investors to understand and learn from their outlook and experience.

Print Edition: April 17, 2008

Harshad Mehta, US-64, Ketan Parekh…Remember the spectacular market crashes thanks to them? And remember the investor reaction? Some wept about having lost their retirement funds, others were devastated by the total loss of money saved for their children’s weddings or higher education. And most of them vowed never to enter the equity market again. So, when the markets started their slide early this year after a prolonged bull run, we thought it would be instructive to speak to some investors to figure out what they thought of the turbulence. We expected pessimism.

What we got was calculated optimism. We expected despair. They spoke to us of hope. So, what’s changed? For one, the profile of the average investor is very different today than it was even 10 years ago. Many of today’s investors are young (most of those we spoke to are in their 20s and 30s) and market savvy. Their youth not only gives them resilience, it ensures that they have a longer investment horizon. This means that they can weather out a bear market or a recession without much hardship. These investors have access to the kind of information that previous generations could not even dream of.

The Internet, television and even the press is full of news and information that aids their investment decision. Most important, these investors have learnt from the mistakes made by their fathers and don’t bet their shirts on the market. They invest what they can afford to lose—and that’s possibly why they are showing no signs of panic. The older investors too are convinced of the long-term wealth creation capability of stock markets, having lived through several phases of corrections, crash and prolonged bear conditions.

The key reason for investors across all ages and income groups not screaming blue murder is that despite the fall since January this year, most of them are still sitting over reasonably hefty gains made in the past 4-5 years. The correction has lowered—not wiped out—their profits. Ironically, this time around, the market experts and analysts seem to be more worried about the slide than the average investor. Now, let these investors tell you why they are not panicking even as the market seems to be falling inexorably.

Sunkara Amarnath
Sunkara Amarnath, Hyderabad

Why I am not panicky: "I’m not 100% sure about the way the market moves but there are 60% chances of the Sensex bouncing back"

Investing in stocks since — 2003
Initial investment — Rs 30,000

Market exposure till January 2008 — Around Rs 2.5 lakh

Investment strategy — I invest for the long term and because I diversify my investment portfolio, short-term aberrations do not affect me much. I invest about 20% of my income in stocks and regularly look for company reports before investing.

Fall in investment value since January — Notional loss of around 25%

Current strategy — I am a bit confused about tech stocks which have underperformed through 2007, although the valuations look good. I am looking to buy into large-cap infrastructure companies, FMCG and metals. But I will wait for some sustained recovery before investing.

Outlook — I feel the market will trade in the 15000-16500 range for some time. I think this is a good time to invest but there are definite worries about market slide since January.

Father’s lessons

Ramnik Chauhan (left) with son Chintan
Ramnik Chauhan with son Chintan
 

“Don’t think your investment returns will achieve your life’s financial goals,” says the elder Chauhan, a veteran of several corrections, crashes and prolonged bear phases. Unlike other investors profiled on these pages, the senior Chauhan, a doctor, tasted the bitter pill of stock investing through harder ways and is therefore instructive.

Early in his investing experience he counted on returns from his portfolio to pay for down payment for his house. That did not happen. But unlike many investors, he did not run away from stocks.

Instead he learnt from his mistakes. “Invest with an objective and have an idea of the time you want to spend in the market. And yes, do learn— not get scared—from the market behaviour,” he says. If you take his advice, you too will not be panicky.

Ramnik Chauhan, Mumbai

Why I am not panicky: "In the long term, the markets have never failed in terms of returns, so what’s there to worry about?"

Investing in stocks since — 1984
Initial investment — About Rs 50,000

Market exposure till January 2008 — A few lakhs

Investment strategy — When stock market discussion enters the bedroom, it’s time to exit the markets. I have seen the stock markets for over 25 years and can say that each time there a frenzy, it’s a signal for a fall. Stock investing is risky with good returns. Make small regular investments into the markets and read up on companies before you enter.

Fall in investment value since January — Not much

Current strategy — I will stick to good performers, wellestablished in sectors where the longterm growth is intact, so infrastructure and construction are on my radar. I am more picky now and spend more time on the fundamentals.

Outlook — This phase too shall pass. Though the pace at which markets will surge is debatable, I will continue to invest in small amounts.

Chintan Chauhan, Mumbai

Why I am not panicky: "I am convinced that the stock markets help build wealth in the long run"

Investing in stocks since — 2004
Initial investment — Rs 20,000

Market exposure till January 2008 — A few lakhs

Investment strategy — Have a sound investment goal and then work backwards to suit your risk profile and the amount of money that you can afford to invest. Invest in small amounts, but consistently. I split my investments into two: one half is parked in value stocks and the other in momentum stocks. I have been following from what I have learnt observing my father.

Fall in investment value since January — Around 15-20%

Current strategy — I am in the ‘wait and watch’ mode and will stay out until the markets rise by at least 10%. Until then I shall remain underweight in equities. If I find blue chips like L&T, RIL and a few more at a cheap price, I will buy. I may consider increasing my SIP amount in mutual funds.

Outlook — It’s difficult to predict, but I think the markets will go down a bit till they find the bottom this time. If you notice, barring a few days of rise post 21 January, the markets have been falling consistently.

Ramnath
Ramnath, Hyderabad

Why I am not panicky: "I am not worried about market movements. I am now averaging out some of my buys"

Investing in stocks since — 2004
Initial investment — Rs 50,000

Market exposure till January 2008 — Close to Rs 10 lakh

Investment strategy — I have learnt from the mistakes I have committed. Holding on to falling stocks for too long is not right; I now cut into my losses early. As a short-term trader, I aspire for 15-20% gains and rotate stocks from there on.

Fall in investment value since January — About 30%

Current strategy — I am selling the stocks on every rise in the market and buying the same at lower levels. However, this strategy cannot be replicated in all my holdings, specifically Bank of India. I am also using the futures and options route to add to my overall gains, knowing well what the risks are.

Outlook — I don’t see the markets coming up in the short term. But I am looking for potential long-term momentum plays.

Ashok Raisinghani
Ashok Raisinghani, Ajmer

Why I am not panicky: "I am not afraid because, my losses are less compared to the gains I have had in the past 4 years"

Investing in stocks since — 2004
Initial investment — Rs 25,000

Market exposure till January 2008 — Around Rs 2 lakh; at any given point, I have a few lakh of rupees in the market

Investment strategy — Stick to companies with a consistent track record of good performance. I check the performance of individual stocks online on a daily basis and study the reports that my broker sends every day. I generally invest in companies that are in the Nifty, although I have subscribed to a few IPOs. I do not trade through derivatives.

Fall in investment value since January — Almost 50%

Current strategy — I am very cautious. I have been diversifying my portfolio, while sticking to blue-chip shares. I am considering buying stocks such as L&T and REL. I generally ignore market rumours, and having seen and heard of other business cycles, will remain invested in the stock markets for the kind of returns they offer in the long run.

Outlook — As a relatively young investor, I am optimistic, as I have only seen the markets go one way—up. The markets will remain at the current level for a few months, but will reach 20000 levels by end of 2008.

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