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'Markets are cyclical: No need to panic'

Last updated on: October 10, 2008 14:33 IST

Sensex sinks in global financial tsunami.

The Indian investor is being slaughtered at the stock markets. The benchmark Sensex on Wednesday breached the 11,000 level for the first time since August 2006, with losing little over 730 points in late morning trade following weak global markets on deepening financial crisis.

In such jittery times, what strategy should you adopt? Which stocks to buy, sell and hold?

In a chat on rediff.com on Wednesday, stock market expert Pranav Sanghavi, replied to many such readers' queries. Here is the transcript:

PRANAV SANGHAVI says, Good afternoon and welcome to the chat. Let's begin.

riyas asked, Hi Pranav, sorry to put a long question. Please advice me about future of the shares if i hold it for 1 - 2 years duration? Some of shares i bought it when the sensex was at 21000, so i also did average during every market correction. Initially i planned only for 2 lakhs investments. Since the market is corrected very much, it induced me to invest more money. Now i invested around 5 lakhs and my current portfolio values are showing only 2.5 lakhs. So i have almost lost 50% of my holdings. But i am ready to hold it for 1 to 2 years. I have bought the following shares. 6 Aban offshore @2300, 15 Bajaj hol&invest @760, 7 BHEL@1700, 20 Canara Bank@240, 40 DLF@ 750, 30 GMR Infras@180, 27 Grasim @ 2100, 20 GujMIn@200, 25 Great eastern@ 350, 20 HDIL@ 700, 80 IDFC @ 90, 43 ICICI Bank @ 750, 5 Infosys @ 1400, 15 L&T @2500, 11 Rel infra @ 800, 5 RIL@ 1780, 40 RCOM @ 614, 22 SBI @1800, 30 Suzlon@240, 30 Tata Chemicals @ 340, 35 unitec @250, 35 Tisco @ 450, 50 sesa goa @116, 20 Punj @220. Thanks.
PRANAV SANGHAVI answers,  at 2008-10-08 15:39:25Yours is a case simillar to a lot of investors currently. We are facing unprecedented times. You will have to hold on to your investments. In a year you should have covered most of your losses. In fact this is a good time to start buying in small parts on every dip.
aryan asked, Can sensex reach at 10000 or less than that level.? What is your advice if people bought the shares when the sensex was around 21000. Even after carefully invested in every major dip, i lost around 30 to 40% of my porfolio but i am still holding it. So for share market has given only bitter experience. Do you still think that the share market is still a good investment option? Kindly advice.
PRANAV SANGHAVI answers, Today the Sensex effortlessly broke the 11,000 mark. So it could be just two more days of markets going down and the 10,000 mark can be broken. I think it is not a time to find out what the bottom is going to be but rather to find true value and wait for lower levels to start buyin in small parts. I know most of the investors are terribly shaken and have lost all faith but I am sure most of our frontline stocks will give decent quarterly results in the days to come.
MRV asked, It is very diffcult to see even the quality shares like RIL and L&T are falling too much. Though i bought the shares at close to 52 weeks low, it is still falling rapidly. What kind of measures do we need take at these situations?
PRANAV SANGHAVI answers, If you are a trader there is only one remedy. And that is to stay away. If you are a long term investor probably now is a good time to figure out companies which you think will grow at over 15 to 20% for the next couple of years and see their P/E ratios. If they are below 5-6 it is a sure buy. Again buy in small parts as at 12,000 index stocks may have looked atrractive but 2 days later we saw 11,000. So buy 5% of what you intend buying on every crash of 7 to 800 points.
maran asked,  Have you ever experienced this kind of continue crash in the stock market. If yes, What was your lesson learned during the period?. Our hard earned money is not safe at all. Kindly give some tips.
PRANAV SANGHAVI answers, I have been in the markets since 1991. So I have seen the highs and lows of both Harshad Mehta and Ketan Parekh times. But let me tell you neither compare to this complete global meltdown we are witnessing currently. These are unprecedented times. Right now banks are giving over 10% on Fixed deposits. You could punt your money there and after a year when the markets ae more stable you can delve into the markets if you are a short term investor.
DEEPAK asked, HI I HAVE PURCHASE ABAN OFF FOR RS 2200 WHAT SHOULD I DO NOW?
PRANAV SANGHAVI answers, It has come crashing down like most of the other stocks. Even quality stocks like Aban are getting beaten down. There is no respite. So I would only ask you to hold on. You will see even lower levels maybe but over say 12 months you may be able to reduce your losses or eea small profit.
SRB asked, I have 30 suzlon at 300, and 20 canara bank at 240. Shall i hold or sell? Thanks
PRANAV SANGHAVI answers, In the short term you may see lower levels as the global markets are also in a turmoil. I would not sell at these low levels. I would surely hold on.
SRB asked, How safe to buy the Ranbaxy and Jindal steel now. thanks
PRANAV SANGHAVI answers, The class action case against Ranbaxy wa pulled out of US ourts which is good news for the company and you saw it close higher but according to me it is only temperory relief. Ranbaxy will face the same effects that the markets will witness. Jindal Steel is a steel commodity stock which is of cyclical nature. Currently all markets including commodoties are facing a severe sell off and thus lower prices for the commodities. So in the short term JS also looks weak.
Poonam asked, I am a member of Reliance Mutual fund. Whether the decesion of becoming a member of reliance Mutual Fund was correct of wrong?
PRANAV SANGHAVI answers, Currently most Mutual Funds are below their NAV's especially ones which have been floated after 2006. As the index has reached 2006 levels.
ram asked, What is your take on Guj NRE. shall i buy now at CMP? as it is corrected very much.
PRANAV SANGHAVI answers, In the short term fundamentals will not play a role in price discovery. All stocks are correcting at a massive rate of over 4 to 8 % a day. So in the very short term I dont think the stocks can go against the market. One has to wait and watch the markets and when they stabilize take a call on the same.
rajiv asked, what to do for an investor who have entered markets at 20 K
PRANAV SANGHAVI answers, Take more positions at current levels.
AKAGGARWAL asked, pl, advice 20 low cost shares for 2-3 years
PRANAV SANGHAVI answers, If you look at the results of the top 200 companies atleast 60% will extremely attractive but one has to see which sector the company is in, what is its future growth prospects in the current global financial crisis etc. I would look at stocks like RIL, SBI, L&T, IDFC, HDFC Bank, PNB, BOI, BOB, Ind Hotels, NTPC, and many more.
vishakha asked, what is the future prospect for NTPC, BHEL,L&T, SBI, Powergrid,RPL,Punj Lloyd,
PRANAV SANGHAVI answers, I think if you take a 1 year outlook you will surely see a decent profit from current levels on these stocks.
karmi asked, Hi pranav, Can we expect more downside in the market, what level will sensex go down? Is it possible to find out the bottom of the market as the negative flows into market at regualar interval. Thanks
PRANAV SANGHAVI answers, Predicting a bottom for the index is next to impossible. There will be a point of influction when the markets will rebound an recover but when and where is that point no one can tell. This time the problem is deeper an wider spread geographically and not limited to our country.
savi asked, Hi pranav, i am using ICICI direct demat account for the shares tranactions. There are lot of news coming about ICICI bank these days. If something happened to ICICi bank (let us say bankruptcy), what about my holdings on ICICI direct. Will the holdings also got affected.? Kindly advice. thanks.
PRANAV SANGHAVI answers, They have come out and said time and again that their capital adequacy is well beyond the required limits and all the depositors monies are safe.
sushant asked, Hi, I want to buy sesa goa, ntpc and power grid, how are these shares and can i buy at this juncture, I want to keep it for 3-4 years of horizon
PRANAV SANGHAVI answers, I think you could look at them with that time frame surely but buy in small parts on every major dip.
ravi asked, Hi pranav, there is huge loss in my investment due to the market turmoil. Shall i buy more shares at large cap to average the shares that i am holding. What is the right time to enter the market?
PRANAV SANGHAVI answers, Only if you are a long term investor with conviction of our markets you can look at investing at this juncture. You can look at entering on every dip in small parts.
clue asked, Hi Mr Sanghavi, Would like to have your comments on how do you see the market behaving after 6 months when all speculations will die down and also we will have clear view on federal moves and bail out packages across USA & Europe
PRANAV SANGHAVI answers, I think the markets will be definately more calmer in 6 months than they are now.
chetanb asked, What should be investment strategy, should i book loss and exit or should remain invested. I am a long term investor and can stay invested for 3-5 yrs. Do suggest. Thanks
PRANAV SANGHAVI answers, Definately stay invested as booking losses at this juncture doesnt make sense. See after every rise there is afall and after every fall there is a rise. This time that rise may be longer than the last time so one has to just hold on.
amardeep asked, Hi Mr. Sanghvi, I have some investment, mainly in SBI ULIP, Horizon i & II, the instalment is about 1 lacks/ year, for next 20 year. How my investment will be effected because of this crises. Thanks
PRANAV SANGHAVI answers, If it is over a 20 year period you will probably have a return over say 5 to 10% over that time frame. In the short term theinvestments may be down a bit as the markets have come down by over 30 to 50% depending when you invested last year.
yadav asked, How u see L&T
PRANAV SANGHAVI answers, I think the stock has corrected bu over 20% in just 4 trading sessions and it does not give its true value. I think L& T will give good results forthis quarter and you could see better levels on the stock.
girish asked, can i invest in RIL at the present levels?
PRANAV SANGHAVI answers, RIL is a absolute reflector of the market movement. So if the market goes down rest assured so will RIL. So one should take a call on markets and then invest in RIL. Though in a year I am pretty sure RILL will be trading at higher levels than it is trading currently.
grrr asked, can i invest in wipro
PRANAV SANGHAVI answers, I wouldn't look at the stock currently as It has a lot of business dependent on the US markets. One should wait for the guidance that the company gives during its current quarterly results next week and then take a call.
nrupareliya asked, Hi Pranav, I have IDFC,L&T,RIL, Rajesh Export,Rpower,HDIL, how these stocks will perform in next one year?
PRANAV SANGHAVI answers, From currently levels you could easily see a 15 to 20% return on most stocks.
BaluSalvi asked, Real Estate stocks are down by almost 90% from January levels.Why are real estate prices not coming down??
PRANAV SANGHAVI answers, It's good you are aking that as I have been asked the same question a lot of times in the recent few days. See the equity markets are far more liquid as compared to the real estate markets. It take a whole lot more time to sell a flat as compared to some stock that you hold. So ideally a stock market could fall overnight where as real estate markets would take anything from 3 to 9 months to reflect the drop.
Anand asked, i got DLF at 306 what to do ?
PRANAV SANGHAVI answers, You can only hold on. The real estate stocks will not give you good returns in the short term. But even some of them are under valued like DLF or Unitech and they may give a shrt bounce if the market bounces back.
KShah asked, Hello Pranav, I am already @ 50% Loss. Shall I hold or sell
PRANAV SANGHAVI answers, I would hold and not sell at these levels.
JERRY asked, HV PURCHASED ISPAT @ 75.00 500 SHARES, HOW LONG TO KEEP THE STOCK PERIOD ,HOW MANY MONTHS
PRANAV SANGHAVI answers, I have always mentioned that Ispat has been a risky traders stock and asked to stay away from it. I don't think the stock will reach that level in the near future.
chetanbhojani asked, Should i invest in RPL at todyas levels????
PRANAV SANGHAVI answers, You could buy in small parts if you are a long term investor.
ramojirao asked, i have rcom 1000 @ 550, i am holding for more than 12 months. what should i do pls advice
PRANAV SANGHAVI answers, See the company is one of the leaders in a growing sector. It is a profitable company and I think the company will give decent quarterly results. So you will have to hold on but it will take time to give you a decent profit.
BaluSalvi asked, How many private or public sector Banks have invested in Lehman Brothers like ICICI Bank?
PRANAV SANGHAVI answers, ICICI bank also has a very miniscule exposure to Lehman. In fact Lehmans Funds have a lot of investment made in to Indian companies.
vinay asked, How is stock of L & T at 1000/- ? Should one invest at this time for about 6-8 months?
PRANAV SANGHAVI answers, Yes.
Ashish asked, I bought stocks worth 40000 when the markets was at 14k, i have lost hopes now. Do i keeps the stock with me or sell them soon ?
PRANAV SANGHAVI answers, Keep them. Don't lose hope. Markets are cyclical and what goes down does come up eventually.
BaluSalvi asked, As our FM repeatedly assuring that our country has strong fundementals,and there is no need to panic,how far can we take this for granted?
PRANAV SANGHAVI answers, He does make sense and is trying to bring some sort of semblance in our markets. Today after he spoke the markets did end with massive recovey. At one point we were down by over 850 points and well below the 11,000 levels.
neetu asked, is it the right time to buy stocks for a new investor looking for a horizon of 5-6 yrs, shares like l&t, reliance, tata etc.
PRANAV SANGHAVI answers, Yes absolutely but buy in small parts and dont panic with short term volatality.
skm asked, Hi Pranav, Many of my queries are not answered before. I have the following stocks in my portfolio : ICICI Bank@775/-, HDFC@2298/-, IDFC@95/-, L&T@1384/-(after bonus), BHEL@1731/-, VOLTAS@124/-, Praj@190/-, NTPC@198/-, SUZLON@221/-. Reliance Ind.@1679/-, Bharti@751, Rcom@448/-, SOBHA DEV@543/-, BARTRONICS@175/-, TCS@1095/-. Do you think any changes required in my portfolio currently and can I hold and expect good returns in 3- 5 years time. Could you please also give me your e-mail ID.
PRANAV SANGHAVI answers, I think you could swith stocks like Shobha Dev and Bartronics. Barring these you have a good mix of stocks. You could add more at lower levels.
PRANAV SANGHAVI says, Well it is time for me to leave. Happy Dasera to all. And don't panic. Markets are cyclical by nature.