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Shashi Ashiwal

A monitor at the Bombay Stock Exchange displays Dr Y.V. Reddy, RBI Governor, addressing a press meet in Mumbai on Tuesday as the BSE Sensex closed down 557 points. —

Our Bureau

Mumbai, July 29 The market tanked today as the RBI announced a further hike in both the repo rate and the cash reserve ratio. So what should a retail investor do now?

Should they wait at the sidelines still or should they start buying as the markets have fallen to ‘attractive’ levels?

Those investors who took loans from banks to invest in the equity markets will think twice before doing the same as the rates have been hiked, said market men.

“Even if one may make 15-20 per cent returns, what is the point now, when the interest rate on the loan itself is around 10 per cent. The retail investors have lost confidence in the equity market and now with this, their confidence will dwindle further,” said Mr Alex Mathew, Head of Research at Geojit Financial Services.

Market men are of the consensus that the retail investor should at the moment stay away from the market and let the market fully grasp the 25 bps increase in the CRR and the 50 bps hike in the repo rate.

“This is definitely the best time to buy, only for those investors who understand the markets thoroughly. Those who are not well verse with the equity markets should stay away during such choppy times.

"And those who are willing to invest should invest with a long-term horizon in mind, say three to five years’ time,” said Mr Raamdeo Agrawal, Director and Co-Founder of Motilal Oswal Securities.

Stay on the side lines till the next cycle, that is Friday, and then decide the next step, said analysts.

“The July series in F&O segment expires on Thursday and the retail investors should wait for that. On Wednesday and Thursday the markets would be very choppy, so it is best for the retail investors to see how the markets react on Friday and then decide accordingly. If one does not intend to stay invested for a long term, they should not enter the stock market right now,” said Mr P.K. Agrawal, President - Research at Bonanza Portfolio Ltd.

Mr Mathew added that there could be a bit of portfolio churning that will happen on Wednesday, which will again impact the market.

Invest in defensive sectors now and reduce exposure in interest-sensitive sectors, say market watchers.

“Continue investing in healthcare and FMCG stocks and there is some value in certain mid-cap PSU bank stocks,” said Mr Agrawal.

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