Mar 21, 2008

Life may never be the same for investors

A few friends would cease to be friends. Invitations for rave parties would stop. And some will prefer moving into smaller homes. Exotic holidays or a second car will have to wait for better days.

The near 30% fall in the market, erasing about two years of investments of an average investor, in plain 47 trading sessions will change the lives of many who have made their fortunes in the market. From what it appears, life will not be easy below 15,000 points.

 "It's already a financial mess for people who bought shares on borrowed money. From what we see, there could be some heavy sell-off of accumulated assets to repay debts. It might take years for these people to recover their losses," says Mumbai-based financial planner Gaurav Mashruwala.

But what better could investors have done all the while when their equity portfolios were rushing downhill? Not that investment analysts knew about it, investors in silver and metal commodities (in that order) would have made more money than investors in any other prominent asset.

The return profile (for the period between January and March 2008) of various investible assets show that silver has managed to show the maximum return at 28%. Gold, ranked third, returned 22% while investments in arts (paintings) have logged a 6% returns.

Investors who have invested in the MCX metal, energy or agri indices would have logged 24%, 20% and 8% returns, respectively, while currency traders would have been better off pocketing 3% more than what they did in the new year.

"We are already seeing a shift in asset class, that's from equities to commodities. But I'd still say, there is value left in equities; it's so hazy, no one can see it," says Motilal Oswal Securities vice-president (equities) Manish Sonthalia.

"It is safe to invest in equities at these levels. There couldn't be a deeper fall than the one we are experiencing now," adds KRIS Securities director Arun Kejriwal.

 One positive about the current market, according to experts, is that mutual fund investors have not begun redeeming their portfolios. The expert view is that investors should hang-on to their investments, as fund managers would have adopted measures to support NAVs.

Retail investors are advised to buy index funds or index stocks at this point to time. Stay away from mid-caps and small-caps for now is the general warning.

As a result of abysmally low trading volumes and the consequential widening of buyer-seller (bid-ask) spreads, the impact cost of trading in securities has been rising immensely over the past one month. This is keeping arbitrageurs and day traders out of the market, experts say.