The Hindu Business Line : Their lights have been knocked out

Mumbai, Oct. 26 For a group of 18- to 20-year-olds, the first investment they made in the stock market, and that too on borrowed money, was into Reliance Power. And one of the reasons for the choice of stock: the younger Reliance scion, Mr Anil Ambani, was once voted MTV icon of the year!

The month was January and euphoria was high as the Sensex looked set to gallop beyond 21,000. It was in fashion to invest in the market, recounts Mr Arun Kejriwal, head of advisory firm Kejriwal Research and Investment Services, who had addressed this group of undergraduates at a college in Mumbai.

But the market now is at the opposite end, with panic at its worst level, he observes. Pessimism seems to have over-run sentiment and the weekend before Diwali, the festival of lights, looks anything but festive for investors. Grappling, as they are, with what lies ahead, after a hefty 11 per cent fall that the Sensex saw on Friday.

First-timers singed

The Sensex has all but scorched retail sentiment, and the experience is particularly bitter for first-time investors, who entered the stock market in January, smitten by the beguiling fortunes it promised.

Not all were in it for greed, says one first-timer, unwilling to be named. For employees with straight-jacket salaries, the stock market was possibly the only other legal avenue to make a little more money to run a well-oiled home. And despite playing cautiously, knowing the fickle nature of the Sensex, investors have been stung for reasons beyond their control, like fleeing foreign institutional investors whose selling has skewed the natural rhythm of the market, says another investor.

Investor experiences range from bad to very bad, says Mr Nilanjan Dey, Director of investment advisory firm Wishlist Capital Advisors Pvt Ltd. Investors had moved out of fixed deposits, that seemed unattractive about a year ago, and got into equities. But today, that decision looks almost suicidal, he observes.

Investors who stuck it out have seen 50 per cent of their portfolio crumbling, and that has hurt. People are shell-shocked when they compare prices of what seemed to be a rock-solid stock, say in commodities or infrastructure, and where it was several months ago.

The real impact of depressed stock-market sentiment can be seen on life-style, like expensive food-related spending, with people preferring to stay close to cash, not knowing what tomorrow brings, he says.

Seasoned investors bitten by the Sensex are sitting it out. Many have not sold their shares when the market was at a high and now they are not putting in fresh money, irrespective of whether they have the funds to put in or not, say market-watchers.

Flicker of light?

But the truncated week ahead, with one hour Muhurat trading on Diwali (Tuesday) and the stock market’s only closed holiday on Thursday (for Bhau Beej), should bring a semblance of respectability, says Mr Kejriwal. Another silver lining for investors with the heart and the funds for long-term investments is that price earning ratios are more sensible and the index is more attractively priced than before, adds Mr Dey.

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