When markets fall by say even 5% most retail investors whom I know do not withdraw their money, they just sit on cash. I met a big fund manager about 12 months back. This is how the conversation went:

Me: I have a lot of Nbfc….what should I do? I mean should I sell?

FM: Subra the fact that you have asked me, ITSELF means you know YOU have to sell. Surely you might curse me in 3 months time…if it goes up. However, you will bless me 12 months from now when it (inevitably) comes down. Luckily I listened to him at least partially. I can get some of those shares now at least 30% lower than my selling price.

I met another FM in a mutual fund forum meet and asked him…’what is the risk now in the market’.

FM: rising interest rates in the US will (he listed the reasons too!!) will push our interest rates higher, and we have enjoyed oil at US $ 40 for too long – and this will go to 80 if not 100, but more than that I am not sure.

I invested in a fund with US $ denominated asset…and have had some upward movement – I guess the exchange rate is the main hero in that game.

No. It is not easy to talk to these fund managers regularly. Another problem is that they manage funds in the public space – and as long as their benchmark does not change the weightage, they cannot change their publicly run portfolios. It is tough, if not impossible.

What should you do when there is a panic?

I mean in today’s market (forget the index) there has been a fall ONLY in some select NBFC. This is obviously not a market panic. You can still have a great portfolio of fmcg, pharma, IT and not feel the fall in the market, right?

Well I can write post after post, but it is YOU who has to act. Not me. I actually bought some engineering shares (which I had luckily sold, so this is not skill, it is bloody luck, but I used the opportunity to buy), and of course some of the Nbfc (no I cannot name them). I have some pharma stocks, some US $ denominated assets – which have actually gone up IN EXACTLY the same period.

Yes Behavioral finance is now a big area, but it was always clear to me that it is INVESTORS who lost money, not investments. I have seen people lose money in shares that I have asked them to buy simply because they would find some ingenious reason to sell shares at the wrong time. For example a person needing money now (if you need money, that should be in debt, but assuming somebody HAS to sell equities) he/she will sell sugar and nbfc. Ask them why and they will say “I saw my portfolio, these were the WORST performing shares”. How foolish can one get? Should you sell a good company which is temporarily down or a company being talked up everyday by media saying “looks like the US $ will reach Rs. 100”?

So first of all understand what is happening. Sugar is in a downturn, and revival will happen, but this is NOT a time to be doing portfolio cleaning and SELLING your sugar shares. Nbfc – put some criteria – market cap at least Rs. 5000 crores, at least 1% dividend yield, well diversified portfolio (writing purely from memory)..and then decide (assuming you get a list) ..whether the PE is at a terribly high level, at reasonable levels, or at mouthwatering levels. Then decide to put say 20% of your Nbfc budget into those shares.

Not sure whether it will work for you. For me the “sell IT buy NBFC” HAS worked in the past one week. That portion of my portfolio is up.

  1. I have been following your blog for the past 8 months. One thing that is keep on bothering me is your language. I’m not complaining, but at times its really non-linear and difficult to understand. For e.g. the conversation block that describes your conversation with the fund managers – that is too complicated and I still couldn’t follow, ‘who said what’.

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