Don’t be Swayed by the Bull Run, Stick to Fun­da­men­tals Ex­perts say in­vestors should not fall for du­bi­ous prom­ises of high re­turns in the short term. One must buy stocks with a medium to long-term view and only those with good fun­da­men­tals, says

Madhu T

The Economic Times - - Personal Finance & Economy -

Buy any stocks, in any sec­tor other than IT and pharma, and you will make more than 100% within a year. You may hear such words (ex­actly or in some vari­a­tion) if you are head­ing to your neigh­bour­hood in­vest­ment ex­perts for ad­vice. Prob­a­bly, the beam­ing ex­pert would also add that no­body can lose money in this mar­ket. Ex­perts ques­tion whether it is re­ally that sim­ple to earn with this strat­egy, es­pe­cially when the mar­ket is hov­er­ing around his­toric highs. Though they dis­miss the whole claim as a per­fect sales pitch to lure in­no­cent in­vestors, they con­cede that many in­di­vid­u­als are likely to fall for it. Most mar­ket par­tic­i­pants are ex­pect­ing in­di­vid­ual in­vestors to re­turn to the stock mar­ket in large num­bers in the com­ing weeks. “Such talks clearly shows that some people’s ap­proach to the con­cept of in­vest­ment is com­pletely wrong. Ul­ti­mately, the re­turns are stock-spe­cific. You have to pick stocks with strong fun­da­men­tals if you want to make money in any mar­ket, and it is never an easy task,” says A Bala­sub­ra­ma­nian, CEO, Birla Sun Life Mu­tual Fund. “Sure, the over­all sen­ti­ment is pos­i­tive and ev­ery­one is hop­ing for a bull run, but that doesn’t make it easy to pick stocks. In­vestors should re­mem­ber that such claims have been proven wrong many times in the past and it will hap­pen again,” he adds.

Re­turn of Re­tail In­vestors

Ac­cord­ing to a sea­soned fi­nan­cial plan­ner, many in­vest­ment ad­vi­sors and dis­trib­u­tors have been coin­ing at­trac­tive slo­gans to catch the at­ten­tion of dis­en­chanted re­tail in­vestors who had left the mar­ket a few years ago. “There are so many at­trac­tive slo- gans, but the un­der­lin­ing theme is you can make 100% re­turns in a few weeks or months,” he says. “Sell­ing themes is the eas­i­est way to get re­tail busi­ness. That is why these people are do­ing it.”

A busi­ness de­vel­op­ment head of a pri­vate mu­tual fund also con­firms that the en­tire spot­light has turned to the re­tail seg­ment. “Ev­ery­body is busy fill­ing the gaps in the re­tail busi­ness in an­tic­i­pa­tion of the re­turn of in­di­vid­u­als to the stock mar­ket. You will hear more noise from this space in the com­ing days,” he says.

Bala­sub­ra­ma­nian says that many in­di­vid­u­als are warm­ing up to eq­uity. “It has been the case for a while now, but now people are ready to com­mit money. HNIs have al­ready started in­creas­ing al­lo­ca­tion to eq­uity in the last three to four weeks. I guess, next is the turn of re­tail in­vestors,” he says.

An ex­pert says al­most ev­ery stock has seen upside, but un­de­serv­ing ones will be se­verely pun­ished later

Be a Bull, but Tread Care­fully

Alex Mathews, head — re­search, Geo­jit BNP Paribas Fi­nan­cial Ser­vices, says the un­der­tone of the mar­ket is ex­tremely bullish and the Nifty is go­ing to touch 7500 in the short-term, but that shouldn’t be an ex­cuse for in­di­vid­ual in­vestors to get car­ried away and buy into such spu­ri­ous claims. His rea­son­ing is very sim­ple — al­most ev­ery stock has seen huge upside in the cur­rent rally, but the un­de­serv­ing ones will be se­verely pun­ished when the tide turns some­time in fu­ture. “The mar­ket will def­i­nitely cor­rect it­self. It is in­evitable. When that hap­pens some of these stocks would crash and be­come illiq­uid again,” he says. His ad­vice is to fol­low such claims only if you are into short-term trad­ing. “But if you are buy­ing these stocks with medium to long-term view, buy only stocks with good fun­da­men­tals.”

Bala­sub­ra­ma­nian says in­vestors must re­mem­ber that it is never too late to en­ter the mar­ket if you are en­ter­ing with a long-term per­spec­tive. For ex­am­ple, if you are en­ter­ing with a 10-year per­spec­tive, to­day’s mar­ket shouldn’t con­cern you, he says adding that only those with such strong con­vic­tion would be able to with­stand such clever baits. “I am telling in­vestors that you just elected a govern­ment and given it five years to rule the coun­try. You give yourself at least five years in the stock mar­ket,” he says. Ac­cord­ing to him, most re­tail in­vestors are bet­ter off in a multi-cap fund, as it gives fund man­agers the free­dom to place bets across sec­tors. More dis­cern­ing in­vestors can also bet on schemes ded­i­cated to in­fra­struc­ture, bank­ing and fi­nan­cial sec­tor, cap­i­tal goods and small and mid-caps, he says.

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