‘Investments For a Secure Future’ - Seminar
It is not a good idea only to go by the tips given by friends, stock brokers or institutional brokerages, whose recommendations might be flashed across the screen by TV channels, for investing in stock markets and it is important for the investors to do their own home work, according to Aarati Krishnan, Chief of Research Bureau, Business Line, Chennai.She said the current market downturn has given a good opportunity for investors to log on to equity investments and as the Indian growth story is intact, it makes sense to stay invested for the long term.Current market downturn has given a good opportunity for investors to log on to equity investmentsAddressing a seminar on ‘Investments for a secure future’, organised by the FICCI Ladies Organisation, Business Line and Coimbatore Capital Ltd here on Tuesday, she said whatever might be the recommendations made, there is an element of interest involved because such recommendations would have been given by market intermediaries to their own clients.‘There is no free lunch anywhere in the world and there is no free lunch in the stock market also’ and whenever there were recommendations on investing in specific stocks, it was better to cross check it, she remarked.
While it might be difficult to the lay investors to go through the annual reports and do financial number crunching, it was possible for the ordinary investors to do some basic home work for which reading financial papers and watching news channels would be of help and over time, it would be easy to pick up information on what would affect the stocks.Turning to the hype generated over investing in IPOs, Krishnan said there was an impression that ‘IPOs could give huge gains on the day of listing’ whereas for investing in secondary market one had to do a lot of home work. This was, however, not true.
In the case of an IPO, investors do not have too much information to make a sound investment decision since a new company was coming out with an issue. The return on IPOs was dependent on market conditions and even small IPOs that were not necessarily very promising tend to do well if the conditions were good.In adverse market conditions, even good IPOs fail to deliver and investors should not be tempted by possible listing gains for investing in IPOs. She cautioned investors not to fall for the low price of a stock and not to be carried away by predictions of target price of stocks for investing and advised investors ‘to let logic, not emotion’ rule their investment decisions.
She said equity investments would become essential to meet the long term goals of life and it was only that one should be careful about the allocation made for equity investment. But investors should adhere to certain fundamental principles of investing like limiting the overall stock exposure, limiting individual holdings and limiting investment in risky stocks, selling when the target price was reached, rebalancing the portfolio and use the mutual fund route for investing.
Referring to the current turmoil in the market, she said the sub prime crisis in the US has caused some liquidity crisis which has led to FIIs shedding some of their portfolio in India. The large IPOs also sucked out lot of money from the market and some day traders have chosen to stay on the sidelines. The profitability of companies also has slowed down compared to earlier years.
Krishnan, however, said nothing materially has changed for the Indian economy and expectation was that investors would get decent returns if they invested today. But investors should phase-out their investment and should stick to good stocks. She felt there were good IPO offers coming up and because of lukewarm investor interest, the chances of getting allocations in IPOs was good. The secondary market also offered opportunities of getting into quality stocks at reasonable valuations and investors should opt for a basket of investments like equity and MF.
D. Balasundaram, Chairman, Coimbatore Capital Ltd, said share market offered immense investment opportunities for people from diverse fields to build their wealth. The investment made should enable one to lead a comfortable post retirement life and the choice of investment should be determined by family circumstances, the risk appetite and post-retirement life plans etc. No other investment could match the returns of the stock market over a longer period and the low transaction cost of equity trading, and with a regulator in place (SEBI) the interest of the investors was protected.S. Karthikeyan, Director, Coimbatore Capital, explained the operational procedures like opening a demat account and trading etc.S. Venkatlakshmi, Chairperson-Coimbatore Chapter, FICCI Ladies Organisation, explained the purpose of holding the seminar.
