Retail investors must focus on research-based advice

MARKET MOODS - V

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Reacting to the Sensex meltdown on May 17, when nearly Rs 1.33 lakh crore of market capitalisation was wiped out, he said, the unfortunate fall was triggered more owing to pressure on margin calls and huge outstandings in derivatives.

How do you react to Manic Monday and how will it impact local and global investors?

The crash was most unfortunate and will take a long time rebuilding the confidence of retail and global investors. No market can absorb such a steep fall, but with fundamentals in place and economy growing at 6.5 to 7 per cent, I feel equity investors can still look at a reasonable return from these levels in the current fiscal.

India is going to be a dominant player in services and outsourcing of manufactured products.

The markets have a fair representation of domestic investors, fund houses and foreign institutional investors and at current valuations are attractively poised.

What were the reasons for the crash?

After the initial selloff, margin calls were triggered, thus escalating the meltdown. For the first time as a result trading had to be halted. If you look at it closely, the disaster was more of a panic reaction.

Do you think the market is robust enough to sustain such volatility?

The capital market structure is definitely robust considering there were no payment crisis following Monday's crash and the markets bounced back smartly after that.

But there are still few things such as physical delivery settlement in future and options, variable margins for buyers and sellers and reduced lot size of future and option contract that can bring further stability.

The markets have also matured with greater institutional participation as one can see that most of the losses caused on Monday and Friday before have recovered in a short period. The markets have shown their efficiency and depth, as the losses got recouped.

What's your advice to small investors?

KRC follows a value investment approach. We believe, the long term prospects of our economy and capital markets are very strong. Investors should take the opportunity to build capital and remain invested for a longer period to optimise their returns.

Typically, in a boom time, investors come running to the market and desert it the moment it tanks. We believe, investors must adopt the habit of systematic, regular investment in equities for more balanced returns. The markets in most probability would become sideways for some time as the economic agenda of the new government unfolds.

We believe, investors will need to work hard in terms of finding out undervalued stocks with a low downside risk. They need to book profits and even provide for losses at regular intervals with a rational and not emotional decision making.

They will have to put more emphasis on research-based advise, regular profit booking and above all understanding one's own risk-return profile. We believe, greater professional planning can help investors protect capital in such situations.

What are KRC's future plans in terms of expansion and brand building?

We started 25 years back by serving retail clients, but today, we also have mutual funds, insurers, banks, corporate, and NRIs as our customers.

In terms of service portfolio, we have grown vertically and horizontally by offering fixed income, portfolio advisory, financial planning, life and non-life insurance services.

We also have our own depository. Research is our backbone and continues to help us maintain our edge in creating wealth for our esteemed clientele.

KRC will continue to progress as a full service provider intermediary. We are also looking at launching PMS service and have already applied to the Sebi for the same.