New Delhi. The atmosphere of the market these days is as if there are colorful lights on the roof of the house but there is darkness in the rooms below. When seen from above, the glow of speed is visible everywhere. Sensex is very close to highs, big stocks look green on TV screens and people on social media are never tired of talking about new heights. But when retail investors look at their portfolio, their hearts sink. Many stocks have lost 20 to 60 percent in a year and the portfolio is lagging behind every day.
Actually, the Indian market is currently running on two different tracks. On one track, there are some selected, huge, strong companies which foreign investors are buying with complete satisfaction. On the other track is the world of midcap and smallcap where the downward pressure is still not ending. This crossroads has confused the entire atmosphere. On the surface it seems that the market is doing well, but internally the health of the market is still full of cough and fever.
More than half of the stocks are still stuck in bear mode
Looking at the index is not enough to understand the condition of any investor’s portfolio. Indexes do not always tell the story of the entire market. There are still more than 280 stocks in the BSE 500 list which are trending down compared to last year. Of these, more than 100 are directly in the bear zone, that is, more than 20 percent has fallen.
That means the picture is clear. A few big companies are pulling up but the rest of the market is not able to support their pace. Especially in the midcap and smallcap segments, the decline is sticking to the market in the same way as mud refuses to be removed from shoes during the rainy season.
The biggest problem of retail investors is that they keep their maximum holding in small stocks instead of big companies. In small stocks, the volume is less, the rise is less and the fall is also greater. This time valuations were high, profits were less than expected and there was indiscriminate selling on every bad news. Therefore, the condition of the portfolio deteriorated and they did not get any benefit from the rise in Sensex.
speed is just a surface shine
A rise in the index does not mean that the entire market is in a rise. It is exactly like if two people are dancing on the stage at a wedding and the camera keeps recording only that while everyone is sitting quietly in the gatherings below.
At present, the real rush in the market is only in those companies in which foreign investors have invested huge amounts of money. These companies are strong in cash flow, linked to global themes and have less uncertainty in their business models. They are liked in every situation and these stocks are making the index shine.
The picture changes here
When you go into the mid and small space of the entire market, the picture turns out to be completely different. Many sectors are still weak in terms of results. At some places the cost has increased, at some places there is no demand and at some places the business clarity is not as desired.
Is this bull market tiring?
Analysts believe that the current environment is like that phase when the boom does not end, but its scope starts shrinking. This is said to be an early sign of market fatigue. It is not necessary that the decline will start now. This only means that further upside will be visible only in selected stocks and not in the entire market.
Broad based bullishness returns only when either the earnings of mid and small cap companies improve or the interest rates come down and money comes back into the risky segment. Without this, the market mood will remain divided into two parts.
What should retail investors do now?
This is not the time to be aggressive but to be disciplined. Many stocks look cheap just because they have fallen. But falling stocks are not always opportunities.
First of all, lean towards those companies whose earnings are stable, whose debts can be managed and whose business is clearly visible for the next 2 to 3 years. Good stocks that have fallen can be bought gradually. But do not make the mistake of considering every fall as an opportunity and jumping without any reason.
If you already have mid and small caps then they are not bad but buy them wisely. It would be wiser to tilt the balance of the portfolio towards stronger companies.
