Should you Book profit or Continue buying Post 4th June 2024

Well, the asset allocation principles often get ignored and readjusted when greed strikes the market particularly when Mr Modi comes back for the 3rd term.  Many investors and market players informed me that the market has discounted the 3rd term of Modi. Well easier said than done and that is what the market is reflecting. Next 3 months we will witness a huge number of Demat accounts being opened and a record number of investors joining the market influenced by Youtubers and social media advertisements.  The majority of this type of investors have a short-term myopic vision of wealth creation and investments chasing 1 two ka 4 types of bets.  At the same time, we will find many inexperienced and short-experienced people becoming financial advisors and guiding investors. These people don’t have the proper educational qualifications or experience to manage investor inflows. They will come to sell products in this bull market rally since  “Allah Meherban to Gadha Pehlwan”

 These investors are the one who are the real disruptors of the Indian market guided by social media influencers.  Improper advice, limited research, and inexperienced advice will drive the price of socks.

 We will witness a bizarre price rise on Midcap and Small-cap stocks.  All brokers and all financial advisors will advise on increasing equity allocations, keeping the current momentum. Valuations will get tossed when the macros are so strong. Hence one will witness wide fluctuations between prices and rationales. You will find many stocks giving astronomical returns where you never heard the company name. One should be prepared for the same.

 This market phase raises the risk of the market and reduces the ability of judgments. Yes, the most phenomenal behavioural aspect of the market and investor follow.   Short-term bets get 90% of the allocation of the market and we often follow the herd mindset.

 What we are forgetting is that this phase is short frame and Indian markets lack valuation rationales at the stock level currently. The macros are not depicting the growth but more on the news side the market is driven.  Further global politics and issues have some impact on the Indian market which cannot be nullified.

 Do you know the biggest risk of the market euphoria is that retirement funds of the senior citizens at the individual level will flow into the Equity market? This we have seen in 2020-21 and we will witness the same. This is also the place where miss selling of various other equity products like AIF, and PMS gets into place. Senior citizens of the age of 75 or 80 are being guided by wealth firms and advisors to invest in these products for huge short-term returns.  Well, greed and myopic investment and wealth creation vision create opportunities for these types of wealth outfits and Relationship managers /advisors.

 Many investors in these market scenarios will pull out funds from provident funds and other retirement products and will invest in equities – direct or indirect.

 The current macros are strong, and the 100-day reform measures and future-driven measures of economic reforms will drive the market to new highs. The inflow in the market will grow from here from sources like Mutual Funds, SIPs, PMS, direct equities, and small-case products but the major inflow will be from mutual funds only.

 The wrong products which will be pitched keeping equities in the loop and disguised are Guaranteed insurance products, PMS, AIF, and SIPS will be stopped and lumpsum equity allocation will be increased, age will not be considered neither client risk appetite will be factored when the products will be sold.

 We need to ignore and follow the basic thumb rule of risk management and the ability to take risks in these markets in case there is a sudden blow-up.  This aspect needs to be kept in mind irrespective of whether you are a new investor or an old investor.    One should check the qualifications of the advisor whom you have made God.  Since in every bull market, even the cobbler becomes an advisor.

 Conclusion and Final Verdict

 Your investments and wealth creation should be either as per the risk profile, as per your goal or as per the defined objective.  Further short-term greed should be short-term and not to be made a longer-term asset burden. Profit booking should be guided based on risk-taking ability and the best advice is that profit booking should be a regular activity since the other name for the same is Rebalancing. Post 4th June and the current euphoria should be taken very seriously despite being recognized as HNI, UHNI and retail. Since money has no category, it's only hard-earned. Markets over the next 5 years will grow at a CAGR of 12% to 15% based on today’s rationale. But it might change at any moment hence invest but not under biases and greed of euphoria

 NRI clients should invest in keeping a long-term view of the Indian markets and not any of the above rationales.  They should look for opportunities across the globe and their advisor should be a Global one having knowledge of his own on the global context and not specific to India.