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
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.