"At the rate the Sensex is falling -- 250 points -- everyday, we only have 99 days of more pain left [before it goes to zero]," jokes Manish Chokhani -- making a point, though, that underlines the kind of panic that stock market is grappling with these days.
The larger point he is making is one that has been made before several times but paid heed to less: it is in the nature of markets to get caught in cycles of greed and fear and investors should -- though few would -- make good use of such situations to help create wealth.
A 30-year veteran of Indian markets, director of investment bank Enam, who has also been closely involved with the private equity space, Chokhani was interacting with CNBC-TV18 where he doubled up today as a guest editor.
In the current market, it is important that investors not lose their cool and instead hunt for opportunities. His advice is to run a tight portfolio with a small number of high quality stocks. It is advice that is fraught with risk -- high quality is in short supply, and well-run investible companies are far and few between -- but no one came about riches in the stock market without taking risks.
Chokhani explains: "For any great investor in the world, if you were to take out their five best stock picks, the rest of the portfolio does not post disproportionate returns," pointing to homegrown billionnaire and value investor Rakesh Jhunjhunwala, whose top picks such as Titan, Crisil and Lupin fetched him the bulk of his returns. It applies to other great investors too: Warren Buffett's success was underpinned by outsized bets on Gillette, Coca-Cola or See's Candies.
Similarly, even in the banking space, which has been the hardest hit in the market sell-off, there are still opportunities. "If you have been an investor in Kotak Mahindra Bank, IndusInd or Bajaj Finance, should you sell those stocks off or should you say that the competition is vacating my space?" he asks.
Looking at the larger picture also helps, Chokhani says.
"All said and done. India remains an island of stability. The government, individuals and most companies are not levered. The market has been hit by a bout of relentless selling from overseas fund managers," he says. "But when all these things settle down, six months out, we are looking at the country's consumption cycle cranking up with a Rs 4.5 lakh crore stimulus coming through the Pay Commission etc."
It is important that investors not try and time the market, he warns. "Bear markets are painful and you have to bear them. The market won't come and tell you that the bottom is in," Chokhani says."Market-timing may lead to investors missing out bounce-back rallies, which are typically sharp and furious," he says, adding that investors should start making fresh buys in a staggered manner. "In any case, there are signs of the market making a bottom formation."
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