When Stock Prices Fall, Stocks Become Less Riskier

The old Benjamin Graham adage always holds true. Through the last eight trading sessions, the BSE Sensex has been falling incessantly. What does it bode for the investor? A time to cherry pick good companies at reasonable prices. Buying a SBI share at Rs 3000 vs. buying it at Rs 2100, which is better? Where is the downside risk lesser? Examine and see. It doesn’t require a seer to foretell the future. Four quarters down the line, when RBI tames the inflation monster a bit, tackles some of the supply side constraints and the PIG economies are back in the sty or butchered as the case may be, Indian stocks will rise like the phoenix from the ashes and give you good returns.

Go and buy front line stocks if you are a conservative and defensive investor — Infosys, TCS, L&T, SBI, Indusind Bank. And if you are a risk taker, load your truck with JSW Energy, Alok Industries, Karnataka Bank and the likes. Be a patient investor. One year down the line all these stocks would be re-rated by the same brokerages from underweight to overweight and you could make a pile.

Philip Fisher the other guru, also said that load your truck fully when an opportunity arises. Good businesses are available cheap. It makes sense to identify a good opportunity, research it and then put all your eggs in that basket. And what does one do after that? Watch that basket like a lioness would watch her cubs. Have you ever invested an amount equal to the price of an apartment/house in a single good stock and waited till the house became mortgage free i.e 15 to 20 years normally. Buy a good stock with all your money and then sit tight for 15 years, it will be much more than the house would be. Remember like all good things of life, real pleasure doesn’t come in an instant.

Neeraj Varshney