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India's stock market has been on a tear over the past 15 months, punctuated by short-lived corrections.
So far in 2021, the 30-share BSE Sensex has rallied by around 8000 points, in part driven by a massive influx of retail investors. Over 14 million new Demat accounts were opened last financial year, compared to an average of 4.5 million accounts in the preceding two years.
A combination of low interest rates, higher disposable income, the spectacular rebound from the pandemic lows of March 2020, and a series of well-performing IPOs have been the main factors driving retail investor interest.
CNBCTV18.com spoke to some of these retail investors to get a sense of their aspirations, motivation and investment strategies.
Prikshit Deswal, Gurugram
Prikshit Deswal, a 34-year-old analytics manager, up until a few years ago, used to think stock markets are a big casino. “I used to think stock markets are a place where only people with deep pockets make good money and the average traders and investors lose all on a bad day. I had absolutely zero knowledge of what Sensex signifies or how stock markets function.”
No one in his family or friends had ever had a Demat account and there were no conversations or curiosity around stock markets at the time, he said. But Deswal wasn’t one to hesitate from taking a calculated risk.
“Back in 2013, I quit my well-paying job as a data analyst to work on my fast-food delivery start-up idea. I took a big risk but had to take a loss after 6 months. It was one of the best learning experiences of my life,” he said.
It was a few years down the line when he started taking his finances seriously that he realised fixed deposits and savings account might be the “safest instruments to grow money, but they are boring and slow.” That’s when he realised “more gains demand more risk,” he said.
Fast forward to 2019, a regular day while surfing YouTube changed the trajectory of his investing journey.
“A video came up out of nowhere in my YouTube recommendations. It was titled ‘Basics of Stock Market for Beginners by CA Rachana Ranade’,” he said.
Interested in what Ranade had said, he read blogs and watched more videos.
“I believe that was the first time in my life I understood how exciting the world of trading is and once can always start small,” he reminisced.
Soon after, he opened a Demat account and bought a single share – 1 share of Tata Steel on September 20, 2019, at Rs 372.35. He sold the stock at Rs 373 twelve minutes later.
“I made a profit of 65 paise. With this transaction, I understood that yes, money can be made. It is about knowing what to put at stake and knowing when to take a loss,” he said. Deswal hasn’t looked back since.
But since then, he has moved from a trader to an investor mindset.
“I am now investing for the longer term and hence I am also keeping calm about the bull run,” he said. His investment strategies are based more on the “common sense”, he says – tracking company fundamentals, and what’s happening in the sectors that interest him.
He has never made a decision based on stock price target predictions, he says, “I do not believe in stock tips, even if they are backed by technical analysis.”
“I believe in creating fundamentally strong investment strategies rather than getting influenced by the vehement market behaviour,” Deswal added.
Talking about his returns, he said when he was starting anything more than returns given by fixed deposits made him happy. “But gradually I raised the bar.”
“However, as I said, I have moved away from trading now and investing for the longer term, hence as of now my exit target for any stock is 40-50 percent upward movement (and a case-by-case decision during downward movement) with a few exceptions which I personally believe can be multi-baggers,” he added. I love to deep dive into the companies and do my own research, he said.
His biggest short-term investment gain so far has been 61 percent from a telecom infrastructure stock and his biggest loss was 11 percent of the money invested in the particular stocks.
His role models are Rakesh Jhunjhunwala and Porinju Veliyath.
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Palak Gour is a thirty-year-old founder of Equity Guruji, a financial platform that gives an insight into all things stock market. “Passion drove me to the stock market in 2015,” she says.
“Many of my father’s friends were in the stock market. I learnt from them and pursued markets after completing my MBA in finance,” she said. Being a woman, her family was happy she did something in the stock market and is succeeding in it.
She aims to make a 7-12 percent return on every trade she makes. “While picking a stock, I look at technical and then make intraday trades,” she said. My aim is to make a safe and risk-free return, she added.
Gour says your portfolio should be correct and fruitful rather than large. “A specific selection of stocks that can give you consistent returns are more important than building a large portfolio,” she told CNBCTV18.com.
She made Rs 75,000 on an investment of Rs 3 lakhs in one minute – her fastest trade yet. On a normal trading day, she clocks 12-17 percent return on every trade.
Pradeep Mehta, 65, a retired finance professional, had his first brush with the stock market in the 1970s when he bought a few shares of Reliance Industries and Colgate.
He stepped up his investments from 2013 onwards. But after retiring from his job in 2017, he devotes his full time to the stock market. His first step before taking the plunge was to purge his portfolio of underperforming stocks by booking losses. Being well versed with financial ratios, Mehta analyses balance sheets before investing in a company.
Next, he looks at the promoter’s stake in the company; the higher, the better, as it is a key indicator of the promoter’s commitment.
Since the pandemic, Mehta says he invests only in stocks with an absolute value above Rs 500.
“People mistake high absolute price as expensive; my experience has been that such shares tend to perform better in the long run,” he told CNBCTV18.com.
He prefers to keep 20 stocks in his portfolio, and at the most 25 if he comes across good companies at a reasonable price. He tracks only Nifty stocks and the top 100 midcap stocks.
Once he has accumulated 2000 shares in a company, he does not buy more. He will periodically trade in and out of 1000 shares whenever there are sharp moves.
Padmaja R, a homemaker in her late 40s, began investing in the stock market in 2017. “I had Rs 50,000 to spare and thought I could grow that by betting on low-priced stocks,” Padmaja said.
“I would mostly trade intra-day, or hold on to my positions for a few days,” she said. The strategy had mixed results. Padmaja then enrolled on a stock market workshop where she picked up the basics of futures trading and technical analysis. “Based on what I had learned in the workshop, I tried my hand at futures trading, and it was a complete disaster,” she said.
Padmaja then kept away from the market for a while and then resumed trading around four months back and says she now restricts herself to the cash market.
“I follow only technical analysis and pick my stocks based on indicators like RSI (relative strength index), MACD (moving average convergence divergence), Fibonacci pivot and super trend. These are working well for me so far,” she said.
Padmaja has trading accounts with two broking firms and says her financial planner suggests stocks to her.
“But I don’t follow his advice blindly, I do my own research. I find the cash market more comfortable as I am able to hold on to my positions for longer. In derivatives trading, you are always battling time and there are sudden calls for extra margins (from the broking firm),” she said.
Padmaja said she is sitting on a decent profit in most of her stocks, though a couple is showing small losses.
Dr Bhavya Soni
Dr Bhavya Soni, an Entrepreneurship and Marketing professor in his late 30s, started investing in the early 2010s while doing MBA. “My finance professor encouraged us to invest a small amount in the stock market,” he said.
“It enabled us to understand the market and its interaction with other socio-political-economic factors in a practical way,” he said.
He is one of those orthodox, long-term investors who analyse a company's fundamentals before putting money in it. “Bulls and bears do affect my decision about the timing of transactions but they do not affect much my choice of a company,” he said.
The condition is, his returns should be above the average market returns, adjusted to the inflation rate. He aims to take his portfolio to Rs 1 crore by 2025.
He finds inspiration and guidance from the quotes by JPMorgan, Carnegie, and Rockefeller. In 2020, he clocked 9 percent returns on his portfolio.
Naveen Sharma is a UPSC aspirant who started putting money in the stock market in 2019 after his college professor encouraged him to take a stab at investing.
Initially, he had decided to follow what is known as the 'coffee can' investing strategy in market parlance. In this, investors buy good quality companies and hold on to them for years.
However, Sharma says, given the market rally, he has changed his strategies a couple of times. "The unprecedented surge in share prices made me reassess my strategy. Every time I notice a negative correlation with the index and returns, it is time for me to change the strategy," he said.
Besides the company's fundamentals, Sharma says he is conscious about how much risk he would be willing to take and accordingly puts money. His target is to make a 10-12 percent compounded annual return on his investments.
He accepts that returns can fluctuate wildly in the short term.
“Percentages are a weird way to gauge profits. Last year, my returns had dropped to minus 38 percent, now it is up 27 percent.”
Nalin Sharma’s investment journey began in 2017, his first year of college. “I was struggling to save money and my friend introduced me to the concept of “Mutual funds sahi hai”. I started a monthly SIP of Rs 2,000,” he said. The concept of mutual funds sparked curiosity in his mind and he wanted to explore more.
“I began reading about active and passive investing, what are mutual funds and ETFs, how to open a Demat account and whatnot. Till today, I still try to learn a new concept every week,” this 24-year-old student from Kota said.
Till 2019, he wasn’t following any trading strategy, just kept a passive approach to investing in ETFs. But then “in 2019, I started investing in the equity market with no system or risk management in place,” he said.
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Sharma now follows technical analysis to look for a point to buy a stock.
“My current investment strategy is pretty simple. Every quarter I track companies that are showing QoQ as well as YoY growth from all the major indices like metal, pharma, realty, Bank Nifty etc.,” he said.
Sharma focuses on small and mid-caps rather than large-caps.
“Every quarter, I have around 150-200 companies on my watchlist. For the next 3-4 months, I only track these companies and look for perfect entry using Technical Analysis. As contrary as it sounds, my investing approach is 70% technical in nature and 30% fundamental,” he said.
Using fundamental analysis, he determines the companies he should focus on for the next few months. Then using technical analysis, he finds a perfect entry and exits.
“Every week, I review the relative performance of all the sectors with respect to nifty and all the stocks with respect to the sector. I then enter in the stock and sector that has outperformed nifty by a good margin,” he said.
Apart from that, risk management and position sizing also play an important role, he added.
He says he doesn’t have a set bracket of returns in mind.
“I don't believe this is the way to go forward. I do aim to beat the benchmark return (Nifty and Sensex) every year. If you're putting in effort day-in-day-out, you should at least be able to beat the benchmark index, in my opinion. If you aren't doing that, there is something wrong with your investing strategy and it's probably better to stick with index funds,” he explained.
Sharma idolises Peter Lynch, an American investor and a mutual fund manager. Lynch averaged an annual return of 30 percent consistently during his time as a mutual fund manager. His book “One Up In Wall Street” was the first-ever stock market book I had ever read, Sharma said.
“I always recommend Lynch’s books to every stock market enthusiast,” he said.
Sharma has been able to clock 17 percent annual returns since 2019 and the blistering market rally in the past 1.5 years has contributed a lot of this return.
“The majority of the stocks in my portfolio have doubled and tripled within a span of 1 year. We've seen an extraordinary return in the last 1.5 years,” he said, adding that he doesn’t think these types of returns are sustainable in the future.