Apr 18, 2001|
The final straw?
First we had the ‘Tehelka’ scam. Then came the classic stock market scam. And this was followed by Infy’s results (which by the way took the breath out of many an investor). Sprinkle these developments with several insider-trading inquiries, bank failures and diversion of company funds into stock markets. And to top it, it has been alleged that the country's largest private sector group has been involved in stock market rigging. Not surprisingly, the benchmark BSE Sensitive Index has lost over 1,000 points since the start of the year.
Could anything else go wrong with the markets? Probably. The stock market scam could get murkier. More companies may be involved in diverting funds into the stock markets. Corporate results of other technology companies could probably disappoint. The recent allegation of rigging against the largest private sector corporate group could further destabilize the markets.
But then, is not all this already factored in by the markets? Difficult to give a one-word answer for this, but probably the markets have factored in a considerable amount of ‘bad news’.
Most retail investors are well versed with the strategy of buy – high and sell – low. This thanks to their advisors, who usually appear when valuations have probably peaked. Now, a number of retail investors out there probably do not know what to do, as their so-called advisors are probably hiding somewhere.
In such a scenario, what should investors do? Go fishing, bottom-up. This approach to investing is based on the belief that good companies will do well (rather, outperform their peers), irrespective of the overall macro environment. Given that the macro environment in our country is not favourable, and valuations have fallen across the board, investors would do well by picking up good stocks, which have seen a decline in valuations due to these external factors. This would go a long way in improving the quality of portfolios.
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