How new investors must navigate share market corrections; Vivek Bajaj explains what to buy and when

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India saw a record number of new investors after the share market rallied followed by COVID-19 pandemic fall. The total number of demat accounts more than doubled in nearly 20 months by November 2021 from March 2020, when the pandemic hit. This year, the stock market fell from all-time highs, and began consolidating. In an interview with, Vivek Bajaj, Co-Founder, StockEdge, advised investors to continue doing Nifty SIP to create wealth in the long-term. Vivek Bajaj also suggested investors to follow a portfolio approach rather than a smallcap, midcap or large cap approach.

Why are smallcaps preferred over mid-, large caps?

In the last six months NSE Nifty 50 fell 5.7 per cent and the Nifty Midcap index lost 5 per cent. But the Nifty smallcap index tumbled 20 per cent. Vivek Bajaj explained that most of the retail investors that come to the market are lured by the smallcaps. People come to stock markets to generate a lot of returns, and this greed drives stock markets. “I believe smallcaps have the highest potential to generate higher returns in the least possible time,” Bajaj said. He explained that India saw a flurry of new investors opening demat accounts because the Nifty smallcap index hit an all-time high in January.

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Now after January, small cap index started mapping downward trajectory, due to which a downtrend in demat account opening was  witnessed. Bajaj explained that the relationship between demat account opening and markets is the relationship between small cap index and demat accounts. Vivek Bajaj advised investors to follow a portfolio approach rather than a smallcap, midcap or large cap approach. When the investor becomes seasoned enough to understand the risks associated, then the proportion could be increased to small caps, keeping the age factor and risk taking capabilities into consideration. 

Why will next year be a super year for markets?

“I do see next year as great because by next year we would have more clarity on all random variables which we are facing right now,” he said. He also expects a flattish interest rate environment, and a huge bullishness in markets. “I don’t see a recession coming,” he said. He suggested investors continue doing Nifty SIP as this is not the market to play aggressive stock specific bets. He advised them to keep accumulating profits and move on.

How to spot opportunities in smallcaps?

Vivek Bajaj said that there are some stocks that are really valuable and available at reasonable prices. And investors can spot such investment by reading and building good networking. Vivek Bajaj noted a few sectors on which investors can look to pocket gains such as sectors that are cyclical in nature such as Banking, and automobile. He also finds the cement, infrastructure, country building, and telecom sectors good.