Don't Invest Emotionally in Indian Gold Rush

"India is rocking! The Mumbai stock market crossed the 10,000 mark last week and is still heading north," said Laxmi Narayan. This is the third year of the bull run and the latest estimated economic growth for this financial year is over eight per cent. Like every NRI, you want a share of this Gold Rush. Hold on; don't invest emotionally if you are planning to buy Indian stocks.

First, you need a fair amount of money to invest. Unlike Mutual Funds, where you can invest as little as Rs 500 every month, stocks need big dollops of money to start your portfolio. Second, the market is a great casino and it would be suicidal to invest all your cash in equities. Instead, spread your investment in Indian equities, Mutual Funds, property and art. Of course, you will reap different rates of return from these investments but remember the old proverb about putting all your eggs in one basket. Veteran NRI investors in India played it very safe, and harvested hefty returns when the nationalized banks offered 12-14 per cent on their Fixed Deposits but now the interest rates are half of this watermark. Now you have to get involved. Third, any diversified investment has to be over a longer period - say at least five years.

Some NRIs are still vary of investing in Indian stocks after the two major scams by the late Harshad Mehta in 1992 and Ketan Parekh in 2000. Since the last one, the stock exchange regulatory body has plugged the loopholes and tightened the rules. In addition, both the Reserve Bank of India and the Ministry of Finance keep a close watch on the exchange for any irregularities. In fact, the Minister of Finance has been repeatedly questioned on the bull run and always maintained that the constant rise in the Mumbai stock index - Sensex - is based on a sound economy and a stable government. Thus the NRI investor is re-assured.

Now the next question is: How long will the bull run last? When will the market 'correct itself"? This is really a million-dollar question no one can answer with any certainty. Only one thing is sure: surveying Indian's current economic, industrial, political and the 'feel good' factors, it can be surmised that the buoyant stock market will most likely continue with the current bullish trend.

An investor can go on waiting for a bearish market to invest and sell for big gains when it turns bullish. This means that no new investors would have entered the Indian market in the last three years! But they did - and the index has rocketed. It is impossible to determine when the market will go up or down. If you are ready to invest for long term, you can do so anytime. The golden rule is to diversify and invest in 'quality' stocks or stocks of reputable companies with a sterling track record, sound management and good potential. Junk stocks can give you one-off high returns but can also sink all your capital. NRIs are constantly bombarded with direct mail offers by post and E Mails from new and/or little-known companies. By investing in a little-known company that promises to deliver the moon, you may end up a loser. The answer to equity investment is to invest in 'a basket' of quality stocks. But which ones?

To identify potential stocks for investing, you need to survey and study the market, especially the blue chips and then decide. A number of independent websites offer this information and assist in making investments. Loads of information is also available on the National and Bombay Stock Exchanges sites. Then there are corporate sites of the quoted companies. You may select your stocks by accessing these websites presenting a massive amount of ready-to-use information to help you to make a reasonably informed decision. On line investment has become extremely simple. You pay 0.5 per cent or less to your on-line broker compared with a stockbroker who charges more. Once you have invested, you need to monitor your portfolio almost daily. This enables you to time your 'entry and exit' from stocks as and when you think appropriate.

Experts says that if, as an investor, you do not have your investment plan, patience, research and monitoring for your investments, delegate these tasks to an independent financial planning professional with the right credentials and track record. Sure, you pay your consultant, but you get tailor-made advice before you invest. Despite this over-load of stock information, remember that stocks are risky and buying them is riskier. Reduce your risk, consult a professional. It's worth the fees you pay.

Investing in stocks is not for the faint-hearted or fly-by-night players. "I know," said Laxmi, "And I want to be a part of the Indian Gold Rush!"

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