Ajay Srivastava has seen many bull and bear markets. He knows that the mood can change suddenly and the present sense of extreme optimism can change to extreme pessimism.
In his latest interview, Ajay points out that the sudden hike in the excise duty on fuel is a tell-tale sign that we may be in for an unpleasant surprise in the Budget.
So, we must be prepared for a correction to set in the first half of 2015, he says.
Ajay also says that the present mood of unbridled optimism is like “moths being attracted to a flame”. The moths get burnt by the flame. Later, the flame itself gets doused and neither the moth (investor) nor the flame (company) survives.
Ajay points out that there is good reason why some stocks are quoting at low valuations. If you carefully investigate their track record, you will invariably find serious regulatory, corporate or balance sheet problems, he says. That is why these companies are relegated to the “backwaters of valuation” he adds.
The savvy investors don’t touch such stocks with a barge pole. However, unfortunately, amateur investors are so blinded by the glittering profits that they see all around, that they home in on these low valuation stocks in the misconception that they are getting a “bargain”.
“That is a moth to the fire”, Ajay said in a grim tone.
Ajay reminded investors of the mini-correction that happened in October 2014. The stocks of dubious quality crashed hard and haven’t recovered their highs even today.
Ajay’s advice is full of wisdom and we would do well to pay heed to it.
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