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What to do (and not to do) at index highs Time: 27:14
Shyam Sekhar, an entrepreneur and past President of the Tamilnadu Investors Association, is a highly accomplished equity investor in his individual right. In the last five years, he has donned a new hat as Founder and Chief Ideator for i-thought Advisory Services helping individual investors with mutual fund selection and running a successful Portfolio Management Service. Aarati Krishnan, Consulting Editor with Business Line caught up with Shyam on a day when the stock indices hit new highs, to know how retail investors should deal with such milestones.
Asked about how retail investors ought to react to milestones such as Sensex hitting a lifetime high of 64000 or the Nifty50 touching 19000, Shyam said that milestones made by the indices should not matter much to investors who followed a bottom-up approach for their stock portfolio and invested in the larger universe outside the index stocks. He explained that he personally didn’t see any need for action on such occasions, as long as the companies in his portfolio were keeping to the earnings and business trajectory he had envisaged at the time of investing.
Asked if investors should be booking profits on stocks now, he recommended that investors should do so only if they felt valuations for specific stocks they owned had become too frothy, beyond their expectations. “In long-term investing, you get the best results by reducing the number of decisions you make and not interrupting the compounding on the good stocks you own. So, I try not to react to index levels or what’s happening to the market sentiment at the index level” he said.
Shyam however observed that certain sections of the market had turned frothy on too much money chasing too few stocks. He made special mention of the mid-cap segment, which has had too much institutional money flowing into a narrow set of stocks, bidding up valuations to expensive levels. “Investors who have a high exposure to mid-caps may like to take money off the table” he said.
He pointed that the recent string of block deals in marquee stocks where promoters, top management and long-standing private equity investors exited their holdings, while domestic institutions bought into these names, hinted at this being a good time to exit these stocks. Domestic institutional investors buying into these names, he felt, may pay a price in the long run for their high entry valuations.
Asked if managing other people’s money was a different ballgame from managing one’s own portfolio, Shyam said that managing others’ money was infinitely more challenging as one had to be conscious of the fiduciary role that a portfolio manager played, in ensuring a smooth journey and good return experience for retail investors. “The kind of investors entrusting their money to PMS managers today are very different from those who did so say 15 years ago. Today we have investors who are relying on us for their wealth creation, they don’t put money they’re ‘willing to lose’ in equities”.
Tune in to the podcast for these and many other unique insights!
(Host: Aarati Krishnan; Producer: Jayapriyanka J)
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About the State of the Economy podcast
India’s economy has been hailed as a bright spot amid the general gloom that seems to have enveloped the rest of the world. But several sectors continue to stutter even as others seem set to fire on all cylinders. To help you make sense of the bundle of contradictions that the country is, businessline brings you podcasts with experts ranging from finance and marketing to technology and start-ups.
GUID: 78a04ae4-15cb-11ee-9203-2bc480cfa7c0
Release Date: 29/06/2023, 11:00:00
