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Business News/ Opinion / Views/  ‘Despite blips, the market trajectory moves in one direction’
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‘Despite blips, the market trajectory moves in one direction’

Many investors were basically throwing darts in the dark and hoping that at least some would hit the target

Raj Khosla, founder and MD of MyMoneyMantra.comPremium
Raj Khosla, founder and MD of MyMoneyMantra.com

With the Sensex touching the psychological mark of 50,000 for the first time, Mint Money’s “Sensex Diary" series lets finance professionals and ordinary investors document their lives alongside the Sensex in all its ups and downs. In the third instalment, Raj Khosla, founder, MyMoneyMantra.com, narrates his journey since the late 1980s.

My first stock investment took place in the late 1980s when the Sensex was a three-digit figure that could rise and fall for the most inexplicable reasons.

I remember buying 20 shares of Hindustan Unilever (HUL), the bluest of bluechips at the time. Why did I buy HUL? I am a chartered accountant, so I assess stocks on hard numbers. Those days, companies gave out numbers once a year and you had to get hold of a company’s annual report to know its financial health. HUL numbers stood out as the most credible.

To be honest, investing in stocks at that time was in many ways no different than horse racing.

As it were, the finance minister catching a cold, a strike call in one corner of the country or even a verbal spat in Parliament could bring down the Sensex by 1-2%.

Many investors were basically throwing darts in the dark and hoping that at least some would hit the target.

With no regulatory oversight, even obscure stocks like MS Shoes East and Mesco Steel managed to hoodwink investors with fantastic numbers and bombastic announcements.

Things changed drastically after the Harshad Mehta scam.

The establishment of the Securities and Exchange Board of India and the launch of the National Stock Exchange in 1992, followed by the introduction of dematerialized shares were significant reforms for investors.

Luckily for me, I had access to an Over the Counter Exchange of India terminal where one could track share prices in real time.

My one big regret is missing out on the Infosys Technologies IPO that came out in 1993.

The issue was undersubscribed but went on to become a mega multibagger for investors. It has been a costly lesson for me—never shut your eyes to new companies tapping the market.

But only a few years later, investors learnt another lesson when the dotcom bubble burst. The crash came as a rude shock, wiping out almost 50% of my portfolio value even though I had focused on stocks with good fundamentals (Infosys, Wipro, etc).

More than anything, the crash made me question my ability to pick individual stocks and nudged me towards an instrument that took away active control and offered somewhat lower, but more stable, gains in return.

I discovered the numerous advantages that mutual funds offer to investors. Since then, I have allocated a large portion (60-70%) of my portfolio to mutual funds and the balance (30-40%) in direct stock investments.

The 2008 crash was another big jolt. Like any other investor, I too lost money. But the 60% in my mutual fund portfolio bled less than the 40% invested in stocks. Also, I was more prepared for the downturn than I had been in the past. For one, I did not panic when my stocks declined 30-40%. Nor did I lose patience with my mutual funds.

Investing for the past 35-odd years, I have realized that despite periodic blips and troughs, the market trajectory moves in one broad direction.

Yes, there are periods of distress and declines, but markets eventually move up as businesses grow and corporate earnings rise. The Sensex having crossed 50,000 is another milestone in this journey.

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Published: 26 Jan 2021, 05:08 AM IST
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