It is the time of the year when one looks forward to lighter moments and bonhomie at the muhrat trading at the Bombay Stock Exchange. Legend has it that if the trading is good on this day then the forthcoming year will be also good. Of course, experience has shown that it is not always so. But as an individual if you are starting to invest/trade for the first time then the New Year is as good as any other. So how do you go about it? What should be your mind set? Sudip Bandyopadhyay, managing director and CEO of Destimoney Securities Private Ltd tells Olga Tellis about how it is a good time to invest and pick up blue chip stocks.
Q: Is this new year (Diwali) the right time to start investing?
A: In fact it’s a great time to start investing if you are a first timer. The Indian stocks have been beaten down. So the bluest of blue chips are available at very attractive valuations. But it is not the end for the economy. We are at the worst phase of the economic cycle and things have to improve from here. And if there is one asset class that is attractive it is equities. It has to go up having gone down so much. But of course, you must have a long term, like a two-year time horizon in mind.
Q: So you mean it is time to invest in blue chip stocks?
A: Yes you should invest in the blue chips stocks, where you can trust the managements. SBI, L&T, Tisco, Bajaj Auto for instance have gone down considerably. L&T for inst-ance has dipped by almost 30 per cent. Most of the other blue chips are available at a discount of anywhere between 10-30 per cent. So it is an opportunity to buy and get good returns over the next two years.
Q: Would this selective process include sectors?
A: Don’t go by sectors. Pick up specific stocks where the management has a good corporate governance record.
Q: When you talk of long term horizon, for instance, those who invested say in 2007 would be losers today. So how long is long term?
A: It is important that you should have a price target. Say if your stock is Rs 500, and you have a target of Rs 600, then the day it touches Rs 600 you should sell. Why sit and wait endlessly? A two-year time horizon is enough. Markets by definition are volatile and can never be uni-directional.
Q: Where do you see the markets going from here?
A: For the next three months at least they will be very volatile, until the European crisis is resolved and it would be resolved one way or the other. So it will be good for the markets. One thing the markets hate is uncertainty.
Q: Do you see the situation improving in India?
A: It is unfortunate that there is instability due to various factors at this stage. We were doing very well and the momentum should have continued. But nothing is lost, we will grow at seven per cent plus and in today’s world it is commendable.
Q: Percentages don’t really reveal the reality. And the reality is that in several sectors like power, roads etc there are huge delays that are reflecting on productivity and also the share prices of stocks.
A: Look at things in the overall context. Please remember that a lot of work is happening in semi-urban and rural economy. The entire FMCG and consumer durable sector is doing well because demand is coming from these areas. I admit there is income disparity but I have seen chan-ges in the standard of living of people in rural areas.
