Tuesday, October 16, 2007

`No impulsive action; only deep breathing!'

Seven axioms for investors

Retail investors must understand that the present frenzy on stock markets is largely confined to big companies, and that the high prices are due to massive FII (foreign institutional investor) buying in large companies, cautions Mr Kanu Doshi, a Mumbai-based chartered accountant.
“FIIs are drawn to our capital markets because of our strong Indian rupee and buoyant economy coupled with the weakening US dollar,” he explains, during the course of a recent e-mail interaction with Business Line.
“By definition, big size companies are part of all indices and hence the unabated rise in the Sensex. Exit from big size companies for a large investor is much smoother than from smaller companies, should it become necessary on account of any unexpected contingency.”
While there is no sign of a scam or a bubble at this stage in the markets, small investor should be well advised to refrain from buying anything at these high prices, insists Mr Doshi. His counsel to the retail investor is to book profits by selling 50 per cent of holdings, only to repurchase at a correction that is to come sooner than expected.

Excerpts from an interview.

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