Sitting on sidelines and waiting to invest? Here are some tips from market veteran Ajay Bagga

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If you’ve been waiting for a deeper correction in stock markets to create a long-term portfolio, the time may have come, according to market veteran Ajay Bagga.

In an interview with Money9, he gave his views on the factors behind the surge in indices and how investors should go about creating a long-term wealth generating portfolio.

Edited excerpts:

Q: How do you see Sensex’s stupendous run? 

Bagga: One should see the market in three ways which are flows, fundamentals and sentiments. At present, flows are positive as far as overseas investments are concerned. In terms of fundaments, India is sitting at the cusp of corporate as well as economic recovery. The country is also placed well in terms of control over Covid-19 cases. Sentiment wise, one crore investors have entered the market in the last one year. On the other hand, overvaluations will be justified once we see an economic recovery. Overall, the market seems comfortable in ascribing the valuation. Therefore, we should continue to see the market at higher and higher levels.

Q: Is there an impending fear of a bubble being created in particular sectors?

Bagga: Market is hoping for 25%-30% increase in earnings in FY22 and another 20% plus in FY23. If you consider these figures valuations look okay in India. We are not in very frothy space. For long-term investing, a study shows that if you bought 52-week high stocks vs 52-week lows, chances are high that former trading at better levels than 52-week lows in 5-10 years. This shows that growth and momentum both works. However, sometimes momentum turns around and bites you also. Therefore, one should invest for the long term.

Q: What is your advice to investors who are sitting on sidelines?

Bagga: Every time is the right time for investing. New investors can first go with systematic investment plans (SIP) in this market. One should invest fixed money in the market irrespective of what is happening in the domestic equities. In the beginning, one should go for index ETFs (exchange-traded funds). Thereafter, they can go for largecap mutual funds. Later, midcap, smallcap and sectoral mutual fund. Once you get the experience then come to the stock market. Pay yourself first for retirement and medical needs through SIP.

Q: What can be done to spread to boost equity culture?

Bagga: Earlier, fixed deposit used to give 14-15% returns. A series of scams in the stock market and financial global crisis led to the crash in the market. Therefore, people thought this is satta bazaar and one should stay away from this market. However, people should understand that they can create a huge wealth in the long run. SIP also helps in rupee cost averaging. You need to break the cycle of greed and fear through regular long term investing.

Q: What is your view on other asset classes like bitcoin?

Bagga: Indian government have said that they will bring out rule and RBI will create Bharat coin in which we can invest. Overall, bitcoin is a cryptocurrency. We have seen some frauds in this space too. However, people have made money in crypto currency but it is unregulated. Nobody, will hear you in case of any fraud and loss. At present, big investors are buying bitcoin. Brokerages which were earlier saying bubble are also accumulating the digital currency. However, I believe that Indian government will not allow bitcoin due to the fear of money laundering and terrorism. Therefore, Investor should wait for Indian digital currency.