INSUBCONTINENT EXCLUSIVE:
By DK AggarwalWith so much uncertainty about India’s macroeconomic outlook, it is important to make sure your equity allocation is
positioned to do well no matter what happens to the economy.
Over the years, domestic institutional investors have come to acquire
substantial clout in the equity market, which once used to rest with the foreign institutional investors (FIIs)
Earlier every time foreign institutional investors resort to a selloff, the market would tank.
Growing awareness and lack of opportunities
elsewhere have now driven investors to move money in an organised and staggered manner into the financial markets through instruments like
systematic investing plan (SIP), and that volume has become sizeable at about Rs 8000 crore a month i.e
providing enough liquidity and strength to the equity market.
This is the primary cause of the diversion that the market has been showing
against weak macroeconomic fundamentals
Equity returns have, in many cases, leapt ahead of economic fundamentals, making future returns dependent on earnings growth.
Actually, a
diversified portfolio can reduce risks to a large extent by reducing concentration in one specific area of investment
A fall in one stock will likely be balanced out by an rise in another stock, thereby helping minimise losses and providing a more stable
return overall.
It also allows investors to better identify and map a slowdown in a particular stock and then move to adjust the portfolio
to give a larger weightage to stocks that might be performing better
Another the most important rule of investing is managing the close relationship between risk and return
Without risk, there can be no returns
Hence, one should invest up to an certain extent which one is ready to risk.
Besides, another main thing to keep in mind while investing is
to ensure a long-term investment horizon
Having good insights on equities is essential; quality stocks are the backbone of a defensive equity strategy
Investing in quality stocks offers a degree of stability and resilience to macroeconomic swings.
Once you have invested in a stock, that's
not the end of it; at every stage, one has to review it
The concept of knowing when to sell a stock is as important as buying the right stock at the right time
One should always invest and book profit in a staggered manner
If you don’t have the expertise, take help of a Sebi-registered investment adviser and this will help you to know which stock to get rid
of immediately and which ones to hold in the kitty.
As we all know, markets are often irrational
And Indian market is showing enough proof of it
Benchmark indices on Dalal Street recently hit their peak levels when economic growth hit a multi-year low, led by a crash in consumption
And it is not surprising that the performance of the market benchmarks is far away from the economic reality.
The only way investors can
safeguard their equity investment against such aberrations is by sticking to the basic principles mentioned above
Chairman and MD, SMC Investments and Advisors
