Advice to investors: Don't leverage, don't trade, don't punt
Chennai, May 23
While there were smiles and sighs of relief on Tuesday as the equity indices recovered, they did not reflect the deep wounds this meltdown has inflicted on many investors/traders. Take the case of a retired general manager of a PSU bank in Mumbai. He had taken loans against his FDs worth Rs 22-23 lakh, and in two trading sessions - Friday and Monday - he lost Rs 7 lakh of that money.
"Earlier I used to advise him, taking into consideration his age and risk profile. But as the markets rose to dizzy heights, he thought I was too conservative and stopping him from making big money, so he went to somebody else," said Mr Sandeep Shenoy, Strategist at Pioneer Intermediaries, Mumbai.
"He is 68-year-old and yesterday he came to me weeping. It was painful for me to watch a man of his age crying like that. He started blaming his broker, but I had to tell him he had only himself to blame."
He added that what was amazing is that an ex-banker like him "and there are more like him" could speculate with their money in this reckless manner.
"I had always thought that bankers are conservative people, but more people like him have lost a chunk of their lifetime's savings in this crash."
Mr Shenoy said that once the Sensex had crossed 10,500, he had counselled his clients to book profits and keep at least 30 per cent of their investment in cash. "But people just don't listen. I know a few cases where the investors had made a profit of Rs 1-2 crore as the market went up. But the majority of them have lost 90 per cent of that money in this crash. "
He finds it a matter of concern that the heady rise in the equity market has brought new classes of investors "who don't invest; they just speculate and punt. In cities like Nagpur, Chennai and Vijayawada, there are many women housewives, school teachers, college professors, beauty saloon owners, etc - who are playing the markets.
They bring in Rs 2 to 3 lakh and indulge in trading and punting and when sudden and sharp corrections happen as during the last few trading sessions, they get scalded."
But then one ace investor, Ms Cynthia Zacharias, Director, Cinzac Sales and Services, Kochi, sat out the last few rough sessions "without doing anything at all. I feel a little bad that I could have made some money, but I decided not to do anything. The 1,111-point crash didn't bother me because I'm a long-term investor who is invested in fundamentally sound companies and I know the market will bounce back," she said confidently.
On the overall direction of the market, Mr Shenoy thinks that on Tuesday in the post-noon session, "when the payout obligations are over, the market will start rallying. Of course on Thursday (when F&O settlement takes place), there might be some more shakeout and fireworks but after that we expect the Sensex to settle down around 11,200 to 11,300."
Mr Shenoy's advice to investors: "If you have money and the patience to wait for two to three quarters, this is the time to invest for a return of 15-20 per cent. But don't leverage, don't trade and don't punt... if you do, you'll get your back broken."