As the investment ground breaks into a financial earthquake around us, the one question retail investors are asking is: what should I do now? Should I sell and run or is this an opportunity to buy? The short answer: long term investors need not panic, short term investors need not buy. With a bankruptcy (Lehman Brothers), a takeover (Merrill Lynch) and an unfolding (AIG) at the global level sending stocks across the world crashing, could it be different for India? "There is no uncertainty regarding Lehman and Merrill Lynch now," said Sudip Bandyopadhyay, chief executive officer, Reliance Money.
"But if uncertainty around AIG is not resolved then there might be more problems in the short term." Rajiv Anand, chief investment officer, IDFC Mutual Fund echoes this short term sentiment.
"Markets are going to be difficult for sometime as we see large entities in America unfolding, which in-turn will induce investors to get more risk averse." With this sort of 800-plus point intra-day volatility becoming a once-a-month phenomenon, the short term risk around equities has multiplied.
And so have opportunities for those willing and able to hold on to investments for two years or more. "There are a number of blue chip companies that are currently available at their book values or break up value and thus it calls for a good entry for the long term," said Bandyopadhyay.
At a market valuation level, the Sensex is currently trading at a price to earnings multiple of 16.8 and a whole lot of stocks are available at low valuations. This is close to its June 2006 level.
The strategy for investors should be to enter with caution and focus on blue chip stocks with large market capitalisations. "Investors should look to enter quality stocks in a disciplined manner with an investment horizon of at least two to three years," said Anand.
"With that horizon, one can expect good returns." Investors might get tempted to enter smaller stocks.
"But at a time when big blue chip companies are available at attractive valuation there is no point picking up mid caps," said Hitesh Agarwal, head of research, Angel Broking.
Thursday, September 18, 2008
What should investors do now? - Suggestions
Wednesday, September 17, 2008
Two IIM-C Lehman Brothers
Two IIM-C students of the Class of 2009, who had interned with Lehman Brothers in summer, got their pre-placement offers just 15-20 days ago. "We interned at the London office. Work was as usual... no one had any idea that trade was declining," said one of the interns.
Investment bankers including Merrill Lynch and the now-collapsed Lehman Brothers have been big recruiters on the IIM-C campus. For example, last year, 34% of a batch of 291 got jobs in the investment banking and financial services sector.
Even for summer placements, last year, firms such as Merrill Lynch hired 18 students, Morgan Stanley (11), JP Morgan Chase (13) and HSBC Global Investment Banking Division (6). "Both Merrill Lynch and Lehman Brothers are two big players as far as placements are concerned," admitted IIM-C chief administrative officer Dinesh Varma. "They are good paymasters too. Probably, this year we will miss them. There's bound to be some impact but nothing that we cannot overcome," he added.
For the interns, there has been no official communication yet, but they know they will have to put in their names for the permanent placement programme in March next year. "We put in 12-13 hours a day at the London office and worked on hot sectors like commodities and equity sales. Everyone there was very interested in India," the intern recalled.
Last year, salaries for international jobs crossed the Rs 1 crore mark and the highest domestic salary, including bonuses, was in the range of Rs 65-70 lakh per annum, offered by a leading international investment bank. "There were a total of 32 offers made to students by Slot Zero Investment banks," said Rahul Ajmani, placement coordinator at IIM-C. Some of the top notch firms which hired students from the batch of 2008 include Goldman Sachs, Merrill Lynch, Morgan Stanley, Barclays Capital, Lehman Brothers, UBS, JP Morgan Chase and ING amongst others.
-By Sudipta Datta
