What sets the Indian retail investor apart from the world
Indian investors have some specialities or characteristics which would be different from investors across the globe. Some of these could be highlighted.
They are willing to take risks higher than their risk-taking ability. They love to dabble in midcap and smallcap stocks and would also venture to invest in stocks identified as highly risky. They venture into uncharted territory and their strike ratio of success to failure in the Futures and Options segment is less than 10%, which is why the segment has lost a large number of investors in recent times.
There is a trait for which the logic is not yet understood by me, even though I have spent over 35 years in the market, is not selling at a loss.
It's unique, it defies logic but is a fact which cannot be denied. Having bought a share at X' price, the investor will sell no lower than X', come what may. The price may become half, then bounce back. He will get rid of the stock at cost after recovery, but not sell at a loss.
Markets have made big money in the public sector banks which have all turned profitable after fund infusion over a period of two to three years between 2018-2020.
Railway stocks have doubled and trebled in value in under a year. The factor which created interest in them was their absolute price which was in low double digits. The small investor has a mental block when he buys shares which trade in a few hundred rupees but is more than comfortable buying in the range of Rs 30-60.
Another favourite of this category of investor is public sector shares as they pay between 20-33% of their profits as dividends besides the capital appreciation. They have valuations which are cheaper than the market and when markets rally strongly, the percentage gain here is significantly higher.
On the primary market front, this category is more informed than one would imagine. They are aware of market premiums and apply only when their risk reward ratio is in their favour. Rarely do they get caught on the wrong foot. This ability has now shifted to the SME platform and one finds that those issues are subscribed 100 times and over.
If lucky in getting allotment, the returns are disproportionate compared to the main board as the entry level here is about Rs 1.2 lac per lot against Rs 15,000 on the main board. It may be noted that valuations in general on the SME platform is higher than the main board and those stocks that gain, therefore become even more expensive. Those that don't have market fancy or don't do well, just sink. High returns and even higher risk.
The entire focus has now shifted to the midcap and smallcap space where the risks are higher and so the reward. Every other investor has acquaintance with a so-called ?market operator' who is calling the shots in a particular stock or group of stocks. The sharp intra-day volatility is what brings the excitement to the trading in the stocks.
The smart investor has learnt and appreciated the introduction of ?INVIT' and ?REIT' which are a combination of fixed income and capital appreciation. These instruments have an almost assured income component and offer returns higher than fixed deposits with liquidity as they are listed on exchanges and trade with very low impact cost.
Source of information and trading tips are easily available from electronic channels, Telegram, WhatsApp groups and word of mouth.
It's a tough job picking the right source and making money. At the end of the day there is nothing better than doing one's own homework. It's satisfying, it's productive and it's one's own work.