2015 Rewind. Investing in troubled times

Riding on the Modi euphoria, the Indian stock market was on a roll in 2014. But the hope rally lost steam with 2015 turning out to be a lacklustre year. From surging 30 per cent in 2014, the Sensex lost 6 per cent year-to-date. Disappointing corporate earnings, delay in the passage of the Goods and Services Tax Bill, the Chinese slowdown and concerns over the US Fed rate all kept the market on tenterhooks.

So, how did retail investors react to the volatile market? Did they simply wait on the sidelines as the market yo-yoed or did they buy and sell stocks that gave them windfall gains or losses? We spoke to a few active investors to get their perspective.

For Karthik Rangappa, who works with Zerodha, a brokerage firm, Wonderla Holidays is one stock that worked well for him. He has been holding it since the company debuted on the market in 2014. The stock has gained close to 30 per cent this year.

“After doing due diligence, I make a token investment and if the stock starts moving as anticipated over a few quarters, then I start buying more over time. I have been investing in Wonderla Holidays since the IPO and my average buy price is ₹248. The stock is currently at ₹414,” says Karthik.

He has also been buying Amara Raja Batteries; his average buy price being ₹355. After gaining 5 per cent this year, the stock is trading at ₹863.

So, what does Karthik consider while zeroing in on a stock? He looks at how ethical the company management is.

When it comes to hardcore numbers, the return on equity, debt levels and margins are what matter to him apart from whether the company is a duopoly or a monopoly.

“Amara Raja Batteries is a duopoly, the other industry player being Exide Batteries, while Wonderla Holidays is one of its kind. These are the kind of stories that really interest me,” explains Karthik.

Rajalakshmi, a chartered accountant who runs her own firm in Chennai, did not invest much in the market in 2014. But, she was back in action in 2015. The auto stocks she had purchased, such as TVS Motor Company, Maruti Suzuki and Bajaj Auto, gave her good returns in 2015.

This year, she also spent some time researching and identifying smaller companies, such as VA Tech Wabag, Blue Star, Cox & Kings and Sintex Industries which, she believes, will do well in the long run. She also made some other tweaks to her portfolio.

“I whittled down the number of stocks in my portfolio and removed those where the holdings are small, since it was getting tough to track so many different companies,” says Rajalakshmi.

Balakrishna Adiga, a seasoned investor for over 20 years, sees value in companies such as Marico and Thomas Cook. “I bought these some time in January 2015; Marico, when the stock went down following poor performance by the company in one quarter. Marico has given me around 40 per cent, ex-bonus, and Thomas Cook has returned 90 per cent since the start of this year,” says Balakrishna. He, otherwise, invests mainly in large-cap stocks.

Companies such as L&T, Infosys, HDFC, HDFC Bank, TCS and ICICI Bank constitute 90 per cent of his aggregate stock holdings.

This year, he also invested heavily in the beaten down stock of Sun Pharma, which he feels is a good company to invest in. “I believe in ‘buy on bad news and sell on good news’,” says Balakrishna.

For Ramakrishnan Hariharan, who runs a cyber forensic firm, being bullish on the heavy vehicles segment helped. He bought Ashok Leyland, the stock of which has zoomed 70 per cent in 2015. His other bet, Tata Motors, however, failed to pay off.

But while these people did make money on the stock market in 2015, it was not all hunky-dory. They had their share of bad bets too. Karthik, for instance bought South Indian Bank late last year and the stock has lost 23 per cent since then.

Rajalakshmi regrets her investment in real estate stocks, such as Housing Development and Infrastructure Ltd and Sobha which she kept on buying on lows. The stocks, however, did not live up to her expectations.

But what she feels really bad about is her decision to buy the stock of DCB Bank. “The DCB Chairman announced a huge expansion plan this year but the market did not receive the news well. The stock tanked but I bought it believing it would go up. But, after the stock reacted negatively, the bank itself announced a relatively less ambitious plan. So, that was a bad investment,” says Rajalakshmi. The stock has lost 42 per cent since October.

Balakrishna pruned his portfolio by exiting from Hindalco Industries, following CBI raids on the company.

“This was the only loss-making stock in my portfolio. I had originally bought the stock at ₹85, then sold it at ₹151. But, then following the bull run after the Modi Government came to power, I bought the stock again at ₹131. Finally, I sold it this year, but this time at a loss,” says Balakrishna recounting this one investment that went awry. He also sold off the shares of Tata Global Beverages that he had been holding since 2000.

“The stock gained phenomenally between 2000 and 2013 but after that it remained stuck at the same levels. I sold off all the shares at a price of ₹145 this year. I might buy the stock again if the company’s fundamentals improve,” says Balakrishna.

While their fortunes in the stock market have fluctuated over the years, the one thing that has remained steady all through is their faith in themselves. They all rely on their own research while picking stocks. “If I’m taking a risk, I would rather trust myself than anybody else,” says Rajalakshmi.

Balakrishna too feels the same and warns, “Don’t invest based on expert tips. You can’t make a decision based on watching the scrolling text that runs on business news channels. Don’t follow the herd, do your own research and buy a stock if you believe in it and stick to it unless the reason for which you bought it changes. Otherwise, simply buy mutual funds.”