The Hindu Business Line : Small investors miss the bus

Chennai, Oct. 9 On a day when the Sensex registered a single-day record gain of 788 points – moving up 1,000 points from the day’s low – not lustily cheering the index’s dizzy climb were small investors/traders.

“Barely 24 hours ago we had statements from both the Congress and the Left parties indicating that the days ahead would be full of political uncertainty. So in most brokering outlets on Monday the small traders and investors sold their holdings, thinking a much deeper correction was on the horizon,” said Mr Nitish Shah, a Mumbai based broker.

Big Money

He, as well as other brokers and equity experts, believe that Tuesday’s record rally was driven mainly by “big money” coming in from FIIs and high networth individuals. The unanimous opinion was that when there is saber-rattling by politicians, adding to the political uncertainty and the probability of an early election, it is the small investors and traders who lose out in a big way.

Mr Sandeep Shenoy

Mr Parag Parikh, Chairman of Parag Parikh Financial Advisory, Mumbai, confirmed that “big money” was driving this leg of the bull market. Asked how his investors were behaving during these heady times, he quipped: “Behaving, or misbehaving?”

But, he added, the exuberant mood in the market was a clear signal to the politicians that at a time when the Indian economy was doing so well and Indian equity attracting investment from overseas, what politicians said did not really matter. “Looking at the upbeat mood in the market, it looks as though investors are discounting what politicians are saying, and that is indeed a change.”

Vigilance

But more and more cautious voices are now emerging on the direction the indices could take and the vigilance investors, particularly the small investors, should display now. As Mr Sandeep Shenoy, Strategist at Mumbai-based PINC Research puts it, “The last 2,000 points of the Sensex’s journey to 18,000 must have been missed by the small investors, who thought the valuations were already stretched. And the last 1,000 points have come from bigcaps like Reliance, REL, DLF, etc, and typically small investors don’t own highly priced stocks.”

But as heavy inflows continue to push the indices up, “the scenario out there is extremely scary as valuations have been stretched beyond a point.

But when a huge inflow of cash is flowing in, you can’t argue with it, we are in the midst of a euphoric rally and caution has gone out of the window,” he says.

His “worry” is that if the euphoria continues and the market moves up further, as usual “even the diehard sceptics will throw in the towel, capitulate, and enter at very high levels. And we know that the last leg of such bull rallies is extremely euphoric and illogical.”

They sold

Mr C.J. George

Mr C.J. George, Managing Director of Geojit Financial Services, says that watching the rally of Tuesday he got a clear sense that “investors don’t seem to believe that an early election will take place. Others might think so, but the market does not foresee an election in the near future!” He added that many of his investors, who had not been selling in the recent rally, have booked profits on Tuesday.

“The short-term traders were buying and selling, as usual, and they made money too, so everybody was happy.”

At the Geojit’s women’s branch in Kochi too, the mood was upbeat. Here about 50 women traders are present everyday. Describing Tuesday’s mood, Ms Honey John, Branch Manager, said, “Some of them had written SBI calls a couple of days ago, and had thought on Monday that they would make a loss. But with SBI moving up, they closed their positions, making a profit.”

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