A 'ferocious' rally in largecaps now will be a sign of risk, cautions Ramesh Damani

"India's major stock market scams of the past were done by those who believed in trading, not by people who believed in investing," Ramesh Damani said, responding to a question on the lure of quick money.

Retail investors who've given in to the excitement of quick money through trading or futures and options have missed out on an opportunity to create multi-bagger returns, said veteran market participant Ramesh Damani.

Underscoring India's structural bull run, Damani reminded investors that no rally lasts indefinitely, citing examples of Thailand and Japan. Now, he sees momentum in Indian stock market shifting from mid and smallcaps towards largecap shares. This should watched closely, he said. "If we see a ferocious rally from here on in large caps, that'll signal an end to the rally," Damani said, implying that very swift rallies in largecap shares are a sign of risk in the market.

Damani added that he is happy for retail equity investors making profits in this bull run, however it saddens him to know that they also lost Rs 50,000 crore of wealth in the derivatives space, with over 90% of traders losing out, as market regulator Sebi's recent study has shown. BSE member Ramesh Damani was in conversation with CNBC-Awaaz on September 26. Rs 50,000 crore could have got investors a company like Biocon or Tata Elexi, Damani added.

"India's major stock market scams of the past were done by those who believed in trading, not by people who believed in investing," Ramesh Damani said, responding to a question on the lure of quick money. "We have believed that a company's performance results in earnings, which results in share price growth. Whereas the traders have believed in price action alone, or that finding the next buyer alone can bump up stock prices. That is wrong, misplaced."

Damani blamed this excitement of quick money for the missed opportunity, adding that the buy and hold way has created longer term wealth. "The Indian stock market has compounded at 16-17% over the last 30-40 years, those who have bought and held on to shares are the ones who have been blessed with wealth," Damani added. By flipping their shares quickly, the retail investor has missed on the chance of making 200-500x returns, he said, adding that some have learnt this lesson, but some still haven't.

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Cautioning investors against an overheated IPO segment in India, Ramesh Damani said great businesses compound for several years, and the retail buyer should hold on to such winners in their portfolio, and not rush to book profit. "Massive gains in the stock markets have come over short intervals of time, so investors should not try to time the market, but spend time in the market," said the veteran investor.

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