'Equity market is the best option'

What goes up must come down, warned market experts when Sensex was touching record heights a few weeks back.
Therefore, when markets started sliding recently, it should not have come as a surprise. Yet marketmen seem to be dumb-founded by what they term as a 'cataclysmic fall'.

The government along with the finance ministry have pulled up their socks in their bid to explore the reasons.

In an attempt to seek an answer, Indrani Roy Mitra of rediff.com spoke to market analysts, traders and head honchos of business. In the next few days, we will bring you a series of interviews which apart from focusing on the issue will also provide guidelines to investors.

Excerpts of an interview with Jay Prakash Sinha, Head, Kotak Securities Research:

For the past few days the markets have been dropping like never before. Do you think this is a 'correction' or is there more to it than that?

The fall is led by global factors like increased rates of interest in the US. It was influenced by the state of bond market, commodity market and currency market. Spiralling impact on margin was also reponsible for the fall. It's a  correction, though steep, which was long overdue. Valuations for few companies' stocks looks pretty stretched for the past few weeks.

Everyone talks about the fundamentals of the Indian economy being strong, then why this historic market meltdown?

Economy of India is still strong. All the relevant data look healthy and corporate profitability is well on track. Valuations of a few were over stretched, with correction, they look attractive.

It appears as if the Indian stock market is safe only for foreign institutional investors (FIIs) or big domestic funds, while the small investor is being slaughtered. What is your opinion on this?

I don't think so. The regulator, be it the Reserve Bank of India or Securities and Exchange Board of India, has given a  level playing field to all. What a small investor needs to do now is take an informed decision. If he is not able to do so, he must leave the money with a professional. A point to note here is that people who consider the market as an easy money making machine have been slaughtered.

Do you believe that the Indian stock markets are regulated well enough to protect the small investor?

Yeah. We have an extremely well regulated market and the regulators are absolutely transparent.

Market gurus like Marc Faber and Hemen Kothari say that India is in a 10-year Bull Run phase. Do you agree? Why?

There is good amount of attractiveness in the Indian market now. I can't say how long it will run. It is equity which has outperformed everything else on the long term basis.

Where should the small investor invest now? Seeing that the stock market is rising to new heights one day and falling like never before the next, should he enter the market at all?

Equity market is the best option. One can invest directly or through professional organisations. However, it is essential that he or she is well informed.

Should small investors just sell off their stocks and run from the market? Or should they depend more on mutual funds for investment?

If one sell in panic, one is sure to be the loser. It is advisable to stay invested. One should never believe in rumours. Remember: this is the high time to invest.

What stocks or sectors should retail investors look at now?

Retail investors must focus on IT, banking, auto, construction and capital goods sectors

What according to you are the 5 mistakes to avoid for small investors, especially during such volatile times?

• Getting swayed by rumours
• Getting incomplete information
• Not undertsanding one's appetite
• Getting greedy
• Getting panicky

What according to you are the 5 basic norms of smart investing?

• Be informed
• Understand your risk appetite
• Understand the companies
• Do some thorough research
• Invest thru professionals

Sensex Rise and Fall: Complete Coverage

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