How would you analyse the current market scenario?
In the short term it is very difficult to predict the market, but in the long term we consider economic growth and corporate earnings which are intact. I would be optimistic about the market for the next three years with respect to earnings growth on the corporate side. We are predicting a 23% annual earnings growth for the Sensex. Even the nominal GDP (gross domestic product) growth should be about 15-17%. So I see no reason for the market to go down but there could be minor corrections.
Is it a good time to begin investing in the markets?
For a long-term investor, any time is right time so long as your stock selection is good. We always tell all our long-term investors to buy right and sit tight and not to get wavered by small corrections or rise and fall in the market. For investors, the equity game is for at least three-five years, short term is only for traders and momentum players. They need to take into account more technical factors. If fundamentally a stock is strong, in the long run it will go up despite corrections in the short term.
Buy right means?
Sensex has given 18% CAGR (compounded annual growth rate) returns over the past 10 years and 17% over a period of 30 years. So if someone has the patience, then this is the best instrument. Long-term investors should not panic and worry, they should use this correction to buy the right stock. People buy stocks they don’t understand, that is where the problem lies. They should focus on good quality stocks and a diversified portfolio with 10-12 stocks. Don’t put all savings in one sector. And they should monitor it on a yearly basis and not on the basis of price. Prices will fluctuate on a daily basis but the value depends on the fundamentals.
Which sectors will yield investors good returns over the next five years?
The earning momentum is good in both auto and banking stocks. May be some commodities such as steel, and some pharmaceutical stocks. These are all good sectors where you can select good stocks and then a few quality FMCG stocks. So 5-7 sectors, 10-12 stocks and a long-term approach should do the trick.
Do you think there should be more mandatory disclosures in case of services that are availed by high networth individuals (HNIs)?
Portfolio management service has good disclosures today. There are lots of regulatory requirements already and new regulations are not necessary. There will be frauds in any environment.
Several small investors lost confidence in the markets after they crashed in 2008. Those who had direct exposure to equity believe advice from brokers cost them dear…
The markets have cycles both up and down and neither the brokers nor the investors can predict them. In rising markets investors become traders and in the falling markets traders become investors. People change their own profile based on the market conditions. But traders should stick to trading rules and investors should stick to investing rules as these rules are different for both. In a rising market, investors shuffle their portfolios to make quick money. This could cost them dear as in a bid to make quick profits, they could ignore the company’s fundamentals and share value. Similarly in a falling markets, the investor may not have the confidence to take a loss. So the problem is greed and fear. If an investor disciplines himself, he can really get a benefit out of the market investments.
Can brokers help investors take the right decisions?
Yes, I am sure they can. Of course it is the investor’s money, so the onus is on the investor first but it is important for him to have the right adviser. Small investors could find advisers expensive so they should adopt the mutual fund route. If they have a low risk appetite then they should adopt debt products, else equity products. But a broker’s advice is costly and so you have to have the paying capacity also. So the direct route I would say is for HNIs and mid to large-sized investors.