Head- Institutional Sales & Sales Trading Systematix shares
In this market, not all underperforming stocks are bad
Most retail investors tend to stick with underperforming stocks and book profits in outperforming stocks. In your experience, what is the right exit strategy when it comes to underperforming stocks?
In terms of underperforming stocks, one should first find out reasons for underperformance. If the company has issues within and there are issues with growth in the company, it is best to book your losses and look at investing in companies with high growth and better financials. But if you think that the company is a slow-moving stock with good fundamentals, hold on. The stock will give stable long term returns
What is the best way to deal with underperforming stocks in current market environment?
As mentioned above, good companies, although underperformers, should be held on to. In this market, not all underperforming stocks are bad.
Why do investors in general find it difficult to book losses and move on?
Greed and fear. Investors in general find it difficult to book profits as well as losses. There is lack of discipline among investors and hence they find it difficult to move out. If you follow a principle of strict stop loss, exit would be easier.
What is your outlook on the markets in general and where do you see (sectors) underperformance in the market?
I feel that the market is flush with liquidity. The domestic as well as foreign institutions are very bullish on India. In such a scenario, we will see short term corrections in stocks and indices, which would be used as buying opportunities. Domestic consumption theme would continue to do well, irrespective of their high valuations. Sectors with high export dependence such as IT and pharma would underperform. Although pharma may see some value buying, in broader market range, it would underperform.