'Markets bound to look up again'

By Our Corporate Reporter

CHENNAI, MAY 6. The recent stock market crash has shaken the resolve of even the most balanced and tough-minded investors. However, the crash, like many others in the past, is temporary, and things are bound to look up again soon, according to Mr. Vivek Reddy, CEO, Kothari Pioneer Mutual Fund.

In the latest letter to unit holders, Mr. Reddy says psychological studies have shown that the pain of losing money from investments is nearly three times greater than the joy of making profits. So even a slight deterioration in fundamentals can often disintegrate into a full scale crash, fuelled by panicky investors who make rash decisions to avoid losing money in the short term, rather than focusing on their investment's long-term appreciation potential.

The best way to deliver reasonable returns to investors over a full market cycle is by doing intensive fundamental research, according to Mr. Reddy. The steep rises and crashes of stock prices need to be taken in stride, and investors should also take a long term view and not be unduly concerned about short term fluctuations, he says.

In a diversified fund, one can reduce exposure to an overvalued sector and reallocate to other stocks or segments which appear a better bargain. However, in a sector fund like technology, the only course is to invest in stocks that offer the most value on a relative basis.

Kothari Pioneer MF took some corrective steps after it did its internal reviews in early 2000 and implemented several risk control measures to protect the value of its investments.

``On account of this risk management strategy, we have done well against the three measures we evaluate ourselves against - the relevant benchmark indices, other similar mutual funds, and how our clients would have done on their own.'' Mr. Reddy says.

He hopes institutional buying, FII or domestic, and strong corporate results would spark off a reversal in the downslide and induce broadbased buying.

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Section  : Business
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