The Market Podcast | Rajesh Saluja explains how one can avoid getting trapped in LVB like crisis
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November 20, 2020 / 05:16 PM IST
Keeping a portfolio approach and seek the help of a professional investment manager could help investors to avoid getting trapped in stocks like Lakshmi Vilas Bank which will be soon amalgamated with DBS India Ltd (DBIL) — the wholly-owned subsidiary of DBS Singapore, Rajesh Saluja, CEO & MD, ASK Wealth Advisors said in ‘The Market Podcast’.
“The trouble for the lender started when it shifted its focus from the SME segment to large businesses and that was back in 2016-17. It loaned about Rs 720 cr to former promoters of Ranbaxy which went into trouble,” said Saluja.
RBI put the LVB under prompt corrective action (PCA) in September 2019 under which the bank is not allowed to issue any fresh loans or open branches. The equity markets started discounting this as early as 2017 and by the time RBI brought it under the framework – the share price was trading closer to par value.
How can you avoid this? Saluja is of the view that investors should always follow a portfolio approach in which there is a good mix of all asset classes and products so the impact of such duds are relatively minor and outstripped by other performing ones.
The other approach is to rely on a fund manager or an adviser with a good track record who would insure that they filter out such potentially bad investments and if they are included in the first instance they would insure that there is a timely exit, explains Saluja.Disclaimer
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