Why ULIP mis-selling has become rampant ?

Retail investors continued to remain gung-ho on the domestic equity market which took the benchmark equity indices BSE Sensex and NSE Nifty to their record high levels in August. NSE chief Vikram Limaye on Sunday said the exchange has witnessed over 50 lakh new investor registrations in the current fiscal. This is equal to 62.5% of the total number of new investor registrations, at around 80 lakh, that were added last fiscal (2020-2021).

Chances are high that most of the small investors, who entered after March 2020 lows, have made quick money in the domestic equity market to date. The rally is like driving a car at the speed of 150 km/h. Therefore, it is the right time to keep your foot on brake and avoid basic mistakes which may damage your equity portfolio after the run-up.

It is advisable to avoid overvalued stocks and always keep a stop loss while doing short-term trades. One should also check the fundamentals of the company while investing for the long term. Market participants should also avoid leveraging as it may put in trouble in case of any correction in the equity market. The benchmark BSE Sensex has gained 107% since the lows of March 2020, while the broader indices BSE Smallcap and Midcap have outpaced with a rally of up to 197%. Therefore, there is a possibility of some correction after the steep rally in just 17 months.

A survey conducted by Groww showed that around 79.3% of the youths began their investment journey less than a year ago during the pandemic. It also revealed that friends and colleagues were the most influential when it came to investment decisions with 30.6% considering their advice followed by the news (27.4%), and social media influencers (23.4%). Family and investment agents/advisors were the least influential with only 13.9% and 4.6%, respectively. One should consult financial advisors rather than friends and family members while taking investment decisions as they said that a penny saved is a penny earned.