Crashes can Make You Richer.


I have always looked at Market crashes as a great opportunity to make Fast Money. But investor needs to have an appetite & psychology to stay the course.

Crashes have returned Massive Money back to investors who braved it. I have picked out some interesting data from BSE Small Caps, Large corrections.

BSE Small Cap Index, Tanked 34% in June 2004 to 1700 levels from Jan 2004 Highs of 2445, only to bounce back 168% in next 1 year & staggering 354% in 3 years & this feat was repeated on multiple occasion whenever it witnessed a great fall. Well, corrections have always been deep & nerve-wracking in Small caps, I vividly remember March 2009 was May-hem, investors entire capital was almost wiped out, with an 80% cut.

Well coming to the point, in Aug 2019 after an agonizing downtrend which continued for over one and half year this segment is buzzing, Its tanked over 40% from Jan 2018 till Aug 2019 & Since then it has been firming up and delivered over 21% returns in past 6 months, Where will it hit needs to be seen ?

It was fear of the collapse of the entire financial system (esp. NBFC) which led to a precipitous fall in stock prices, especially Mid & Smalls. Hence any sign of stability in the financial system will lead to the strengthening of battered stocks. Below are the few points which makes a case for recovery of Mid & Small Caps:

  • Even a moderate recovery in the economy will enlarge optically on the low base effect of last year.
  • NIFTY/ SENSEX is trading on their lifetime highs and at stretched valuation, especially the TOP 10s.
  • Friendly taxation measures are expected ( DDT/ LTCG) in the upcoming budget.
  • We still are in a low-interest rate scenario, despite a recent spike in food inflation.

Tactical Allocation: is a short to intermediate-term view that looks for investment opportunities in the market. It plays an important role in generating portfolio Alpha. A tilt towards Mid/Small Space is a must for portfolio alpha.

Note: I’m NOT advising to change course of your Asset Allocation, Just a minor tweak in your EQUITY Allocation if there is a risk appetite.

Yogendra Shah

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