Friday, 03 January 2014 00:00

Disruptive Investor On Indian Equities

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The Indian equity markets are still at an early stage of growth in terms of retail participation. There is no second thought on the point that the Indian markets are largely driven by FII investing. At Disruptive Investor, we believe that things are bound to change in the long-term and retail participation will be significant as the markets develop further and as individuals are better informed of investment options.

Inflation is another important factor that will encourage retail investors to increasingly consider equities. At an individual level or household level, inflation is running significantly higher than government published numbers. With consumer inflation well over 10%, individuals need to allocate a part of their portfolio to relatively risky investments to beat inflation. Equity investing provides one such avenue.

At Disruptive Investor, we understand that retail investors have taken a backseat after the financial crisis of 2007, which resulted in meaningful wealth erosion. Investors however need to understand that the same markets had given a return of over 500% since 2003. Long-term investors would therefore have gained 500% just by index investing. I am certainly not suggesting that retail investors allocate all their savings in equities. However, some allocation to equities (depending on age and risk profile), can result in meaningful returns.

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Another aspect of the market, which investors point out, is that the index peaked out at 21,000 (on the SENSEX) in 2007. Six years later, the index is still at the same level. My answer to that is to focus on quality companies than to focus just on the index. Just as an example – Page Industries got listed in March 2007 and has given returns of 1345% since then. Mindtree got listed in the same month and has given returns of 260%. Kaveri Seeds got listed in October 2007 and has given returns of 935%.

I have just given a few examples of new IPO’s. There are dozens of other stocks, which have given mind boggling returns since 2007. I must mention that there are also stocks that have fallen by over 90% during the same period. But that’s what investing in equities is all about – Selecting the right company. If investors follow a disciplined approach to investing, good returns will follow.

Disruptive Investor therefore does not just intend to give good stock ideas, our intention is to bring forward good companies, business model and management. Also, we intend to make investors understand our process of company selection so that every retail investor can be his/her own analyst. At the onset, I ask investors not to blindly follow our stock suggestions. It is best to read our opinions and cross verify facts.

Our intention is to provide unbiased research with solid points to back our story. We will not focus on large-caps. Rather, our intention is to find great companies in the mid-cap and the small-cap space, which can give multi-fold returns over the long-term. We also don’t intend to provide trading recommendations. Markets can however create special situations of extreme panic or over exuberance.  If we find attractive long or short opportunities, we will share those with our readers. We will maintain the highest degree of transparency in terms of disclosures on our positions in the market.

At Disruptive Investor, we also aim to have foreign investors as our target readers. We believe that our expertise in the Indian markets will help FII's to spot attractive investment opportunities.

In conclusion, this is a small beginning towards many big things to come. As we start this journey, we hope that our readers benefit the most from our suggestions. Cheers.

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