Welcome back all of you,first of all very happy Ganesh festival to you all, i hope you all are enjoying it. Ganpati Bappa Morya !
I was a bit busy in last month as it was Quarterly Results Session and generally, most of the Annual General Meetings are planned in August, So I got busy in attending them and so couldn’t write any article.
So let’s get back to business!
Small-mid cap slide Continued :
There is not much relief to small and mid-caps and they kept falling in last month and most of investor’s portfolios are in red which are 20-30 or even 50% down. There is huge panic on the street and retail investors are going through a tough time. Nifty is holding 10500 to 11000 levels due to few stocks like TCS,Infosys, HDFC, HDFC bank and Kotak Bank, while Tata Motors, Maruti had the worst hit in the stock price in this year. Due to this wide gap in small-mid cap and bluechips, retailer investors started shifting to large-cap and bluechip stocks from small and midcaps. Is it the right thing to do?
Let’s first discuss the reasons for this crash.
Reasons for Crash :
There are various reason for crash like :
2) US-China Trade war
3)Crisis in NBFC and automobile segment got affected due to that
4)Indian GDP growth slowed down to 5% in June quarter and it was the weakest growth in last 6 years and GDP growth fallen for 6 straight quarters. Manufacturing, construction, and financial services contributed to this fall in GDP.
Automobile Industry is getting affected due to the NBFC crisis, BS IV to BS VI transition, EV uncertainty and lower demand from consumers. In August 2019 tata motors sales dropped by 58%,maruti by 33%,mahindra by 25%,honda by 51% and toyota by 21%. In motorcycle segment also sales kept dropping in August month, Royal enfiled sales dropped by 24% while bajaj reported 11% in sales.
What to do now?
As we discussed before some of the retailers started switching to large caps and bluechip stocks from small and midcaps. But just because large caps are not fallen yet, that does not mean they won’t fall in the future. Before buying any stock, you should ask yourself 3 questions :
1)Do I understand the business?
2) Is management trustworthy?
3)Is it undervalued currently?
If your answer is “YES” for all the questions then you can go ahead and buy that stock. But just because you bought that stock it won’t stop falling,so if you are confident about its business model, promoters and valuations then you can keep holding it for long term and ignore short term volatility.
Follow your own investment philosophy :
No doubt times are tough, but its market and it is cyclical. But as an investor, we have to face it and it is very important and toughest part in our investing journey, your mind will start playing tricks with you but stay calm and just because stocks are falling you should not sell them. When there is a flood, good, as well as bad guys, get affected due to it and it is exactly same in stock market good and bad both stocks fall when there is panic on the street as it is driven due to sentiments.
Your investment philosophy will help you in these tough times. So spend more time on understanding more about the business model and its products or services and avoid checking stock prices minute by minute. In the long term you will do well if your investment philosophy is correct.
My investment philosophy (S.M.A.L.L):
S-Small in Size
M-Management Integrity and sector growth
A-Available at Fair price
I will explain about this philosophy in some other article till that stay tuned.What were your mistakes in this crash and which are the leanings ? Let me know in comment. Have a great day !
[Your Wealth Doctor]