MUMBAI: Investors need to learn from the ongoing recession which has wiped out wealth across the world. The meltdown has resulted in 70-80 per cent erosion in retail investor portfolio from the Sensex peak of 21,000.

“At the 17,000 level, I invested around Rs 10 lakh during November-December in 2007. In anticipation that the Sensex would touch 25,000, I never exited from stocks even when the index touched 21,000,” said retail investor Bhupendra Shah, who now feels the importance of an exit point for one to book profits.

According to Amitabh Chakraborty, president – equities, Religare, “this recession is much more global than the previous ones. When all economies are interdependent, stocks markets naturally also become highly correlated. That means global funds flow and risk aversion work the same way for equity as an asset class across the globe.”
MUMBAI: Investors
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cent erosion in retail investor portfolio from the Sensex peak of 21,000.

“At the 17,000 level, I invested around Rs 10 lakh during November-December in 2007. In anticipation that the Sensex would touch 25,000, I never exited from stocks even when the index touched 21,000,” said retail investor Bhupendra Shah, who now feels the importance of an exit point for one to book profits.

According to Amitabh Chakraborty, president – equities, Religare, “this recession is much more global than the previous ones. When all economies are interdependent, stocks markets naturally also become highly correlated. That means global funds flow and risk aversion work the same way for equity as an asset class across the globe.”

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The underlining message for a retail investor is to keep close watch on every global movement and to analyse its near-term/immediate implications on Indian markets.

Tata Asset Management MD, Ved Prakash Chaturvedi, said, “the biggest lesson to learn is the diversification of assets across different classes, including equities, bonds, money market funds, real estate and gold. This holds true for investment managers as well.”

Data shows that a diversified portfolio provides good support at a time of crisis. Even as the Sensex touched a low of 8451 between Nov 18 and Dec 17, 2008, gilt funds Kotak Gilt, ICICI-Prudential GFIP, and DSP BlackRock gave an average return of 174 per cent while income funds Birla Sunlife Income Fund, ICICI-Prudential Income Fund, and Kotak Bond Deposit generated 183 per cent return during the same period, according to ETIG data.

In a recessionary situation, retail investors need to cut down on discretionary expenses, invest in medical insurance, shift to liquid investments covering at least 6-7 month expenses, and use the mutual fund route to invest in the gilt/equity markets, said Religare’s Chakraborty.

“Similarly, investment managers will now have to be more careful about managing liquidity in their funds and asset-liability mismatches. There will also be greater focus on credit quality of portfolios,” concluded Tata’s Chaturvedi.

source: Economictimes

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