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'The markets will correct, and they are bound to correct. The boom will turn into bust.'
'When this bust happens, people would lose like they have lost in the past.'
'Whatever you have made possibly in the last couple of years, you may lose in a couple of weeks. That's very much possible.'
Here's independent market expert Ambareesh Baliga's advice to small and retail investors who have entered the stock markets in the last one year and are sitting on decent gains.
"You can take off 20-25 per cent from your small and mid-cap portfolio. Typically, I suggest a portfolio with 60 per cent large caps and 40 per cent of small- and mid-caps," Baliga says in this interview with Prasanna D Zore/Rediff.com.
"Perhaps (investors should buy) 60 per cent of large caps, 15 per cent of mid-caps and small-caps, and 25 per cent in cash. This way you're safe because when the markets correct -- and there are good chances it could correct -- and as an investor you don't have anything much to worry."
The first of a two-part interview:
RPG Group Chairman Harsh Goenka recently tweeted about Kolkata-based operators enacting a Harshad-Mehta like scam in small and mid-cap stocks of companies based out of Kolkata. Where is this coming from?
Isn't this unprecedented that a corporate honcho brings it to Sebi's notice? How do you look at this warning?
If you ask anyone who is there in the market for a while who has ears to the ground, they will tell you what Mr Goenka is saying is true. When you are so closely associated with the market, you do get these feelers as to what is happening and who is doing it. There can't be any smoke without fire.
15 years back, they (the stock market manipulators) were more of the street smart operators. Now you have guys who are well educated, who have been in the industry holding responsible positions and you have some of those guys also manipulating (stock prices of companies).
What kind of action do you expect from Sebi to protect small investors who are invested in these kind of companies and are now sitting on phenomenal returns? What kind of measures do you expect from Sebi?
In a bull market where anything and everything is moving up, any investor -- unless he's gone short as a trader -- who has bought decent stocks has made tons of money in this bull run. I don't think they would have made that sort of money in the last bull run.
The only issue right now is as and when -- because the markets can't go one way -- markets will correct, and they are bound to correct, the boom will turn into bust.
When this bust happens, people would lose like they have lost in the past. Whatever you have made possibly in the last couple of years, you may lose in a couple of weeks. That's very much possible.
Most of the new investors who have come in -- we get quite frightened with the sort of numbers which are rolled out by NSDL and CDSL (securities depositories which safe-keep stocks bought by investors in electronic or demat form) -- are, unfortunately, looking at instant gratification.
Most of them have got into stocks which have questionable antecedents. They are more of momentum stocks which when they start falling would not provide any exit route for these investors. They could possibly lose just not what they've earned in the market, but may also lose their entire capital.
What would be your advice for retail, small investors?
I'll never advise someone to sell out the full portfolio. I have been cautious for a while now. If I told someone you sell your complete portfolio in October (2023) because markets are getting quite frothy, you would have lost out on the gains made by the markets since then (markets gained more than 15 per cent since October 2023 when the markets looked quite frothy and overstretched).
But it's always better to get into cash to a certain extent. Right now I'm suggesting, at least to my clients, to be in cash to the extent of over 20-25 per cent.
You can take off 20-25 per cent from your small and mid-cap portfolio. Typically, I suggest a portfolio with 60 per cent large caps and 40 per cent of small- and mid-caps.
Perhaps (investors should buy) 60 per cent of large caps, 15 per cent of mid-caps and small-caps, and 25 per cent in cash.
This way you're safe because when the markets correct -- and there are good chances it could correct -- and as an investor you don't have anything much to worry. This 25 per cent of cash will help you feel confident to buy at lower levels.
Markets, more than anything else, are a game of psychology. If you have cash in hand, then you'll have the confidence (to purchase) at lower levels. If you don't have cash in hands, you'll panic at lower levels.
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