Despite one of the most influential segments i.e. foreign portfolio investors selling heavily, the Indian stock market remains relatively stable. Thanks to strong support from domestic investors, especially retail ones, the bulls are not willing to give up that easily this time around.

IPOs: No money-spinners

But with the valuation of Indian markets still a bit expensive, it is time for retail investors to take some 2022 resolutions.

The trend in 2021 signals that retail investors madly chased IPOs to make a quick buck on listing day. Most of the IPOs witnessed robust response from retail investors, thanks to easy loans from banks and NBFCs.

While some of the IPOs did not disappoint investors and did give whopping listing gains, a few of them did burn their fingers. However, given the current elevated risk levels, retail investors should use their funds more judiciously this year.

Though the Reserve Bank of India has done its part by limiting IPO funding by NBFCs to ₹1 crore per borrower, retail investors should also restrict themselves to invest only their own money in IPOs and that too in fundamentally sound companies.

Low price isn’t a bargain

Some retail investors buy beaten-down stocks such as those at 52-week lows, believing that they are bargains. Retail investors should bear in mind that there are over hundred examples of beaten-down stocks that never bounced back. On the contrary, most of them continue their slide relentlessly, leaving a big hole in investors’ pocket. Investors should not buy a stock simply because it is available at low price.

Betting on new-age stocks

Of late, a lot of new-age companies have performed well at the secondary market and have attracted retail investors. The businesses or revenue models of these companies are complex, with limited visibility on profits. However, some retail investors are buying them due to fear of missing out on the rally. Past experience suggests stocks from so-called sunrise sectors tend to crash after initial euphoria. Do not dabble in unknown territory without understanding the basics of the company.

Don’t stop SIPs

The most important resolution should be on systematic investment plans. A lot of retail investors use SIPs to create long-term wealth. However, when the market falls, they tend to stop their SIPs out of fear.

Stopping SIPs midway is not a right decision and will affect their returns because they will miss out on any market recovery. Investors should identify products that suit them best based on their risk profile and stick to SIP plans.

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