Several have invested heavily in mid-cap stocks that are down 50-60% of their peak values in Jan 2008

Sandeep Pai swears not to return to the stock market till he recoups his losses since 2008. This Mumbai-based businessman, who sells fire extinguishers to residential properties, had bought some mid-cap stocks in the second half of 2007 — the peak of the previous bull run — but did not sell those when the market crashed in 2008. Instead, he bought some more at lower levels on hopes of a rebound. He has been holding on since then as many of these stocks are still trading at a discount to their peak values.

Pai is among the scores of retail investors whose stock portfolio, led by mid-caps, might still be showing an average of 50 to 60 per cent erosion in value since the January 2008 peak. The inability of stocks to return to their highest levels even as the Sensex managed to rebound close to record highs is one of the reasons why retail investors have been reluctant to return to the market, say brokers and fund managers.

Of the 465 stocks that are part of the BSE-500 index (35 were listed only after January 2008), 271 are still trading below their record levels, according to a study by Business Standard Research Bureau. Of these 271 stocks, 186, including those of Reliance Industries, Larsen & Toubro and BHEL, are trading at a discount of at least 40 per cent to their peak prices.

Morgan Stanley Investment Management Executive Director Amay Hattangadi, who has done a study on investor asset allocation in recent years, says the fact that most stocks are trading ‘underwater’ or ‘below cost’ has been a common grouse among investors shunning equities.

“We got the feedback that bulk of the money was invested in 2006 and 2007 and that in hot stocks of that phase,” he says.

For more visit: Business Standard

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