INSUBCONTINENT EXCLUSIVE:
NEW DELHI: Domestic equity indices may have seen a solid bounce on Friday after Thursday’s merciless correction, but the worries have not
really gone away overnight.
Overseas portfolio investors continue their selling spree as they chase better and safer yields in developed
markets, crude prices continue volatile swings, rupee remains shaky and domestic macro concerns are real and not going away in a hurry.
The
weakness in the domestic equity market in recent weeks has hit investors really hard
The Indian market has been the worst performer in an area that spans China, down 3 per cent, Australia, down near 5 per cent, Indonesia and
Singapore, less than 2 per cent
Bangladesh has lost only 1.82 per cent of market value in a month, while the Thai market has actually gained 1 per cent.
Efforts to control
the damage and dispel the prevailing pessimism have at best provided temporary relief, but failed to instil confidence.
The stock
corrections have mostly been sharp and sudden, giving investors no time to take guard
Thursday’s selloff wiped off Rs 4 lakh crore of investor wealth within the first five minutes of opening trade in response to an overnight
crash in the US market.
Analysts say this correction has some more distance to cover
“We have corrected meaningfully, but I think Nifty and Sensex are still overvalued
The market bottom is at least 10 per cent, perhaps 15 per cent, away,” Saurabh Mukherjea, founder of Marcellus Investment Managers, said
on Thursday right after Sensex slipped some 800 points.
Market veterans say equities, by nature, require one to live with volatility, but
there surely exist ways of prudence that can help one mitigate sudden losses
Minimise losses, they say, should be as important an objective for an investor as is making profit.
But how! Seasoned investors offer five
basic thumb rules to avoid major losses, protect profit and try and make money in such market conditions.
Don’t get carried awayThe most
important thing for an investor is to avoid getting carried away by such swings in market sentiment
Market movement may be important, but one should pay more attention to underlying value of an asset
Know your stock before making a move
You must have a clear idea about what the company produces, how it operates and what are its assets and liabilities.
Don’t speculate, but
calculateMost investors fall prey to speculation
After observing a trend in a particular sector, they start speculating the prospects of a business and let their speculation dominate
It should be clear that despite all the unpredictability, the art of investing is not gambling
Instead of trying to predict the future, rely on facts, available data, calculations and charts
Patience does payLike in other walks of life, patience is among the most crucial factors for success in stock investing
In the word of the Oracle of Omaha, Warren Buffett: “The stock market is designed to transfer money from the active to the patient.” You
are always most likely to get rewarded because of your patience
People who believe in always chasing the buzz are at risk of losing more than what gain
Observe things keenly, remain active and buy at a discounted price
Remember it takes time to master the art of investing
Diversify your portfolioDon’t keep all the eggs in one basket
Your portfolio should be diverse, a mix of largecap, midcap and smallcap stocks
Your basket may have commodities as well
But be careful to not make a choice and don’t follow the herd mentality.
Don’t book profit in hasteHitting the panic button the moment
you get a negative news is one of the worst decisions
Most investors who have made money in the stock market have worked on the ‘buy-and-hold’ strategy
Any negative news may infuse volatility in a stock
Recent example is Infibeam Avenues, which plunged 70 per cent in a single day after a WhatsApp message raised concerns about its accounting
methods.
Unpredictability is the nature of the stock market
It is possible that despite all the alertness and calculations, you may suffer a loss
View that as a learning and move ahead
Like the wise man says, “Pain is inevitable, but suffering is always optional.”
Don’t suffer
