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Trading in times of lockdown: This Mumbai stock investor is doing exactly what he did in 2008

Merani said market fall might eventually look like the 2008 market crash, and that would be the bottom.

, ETMarkets.com|
Last Updated: Apr 02, 2020, 08.13 PM IST
Nooresh Merani-1200
Asked if he has any estimate where the market might find a bottom, Merani said the market fall might eventually look like the 2008 crash, and that would be the bottom.
What do you do when the market turns topsy-turvy, rising 500 points one day only to give up 800 points in the very next day, and the short-term outlook is not too clear?

Just take a break! Because, that’s something beyond your control, then you are not responsible for it. And if there is a lockdown outside, then it becomes an opportunity to spend some quality time with your family.

That’s exactly what Mumbai-based investor Nooresh Merani (35) is doing these days. He took a major hit on his investment portfolio in the unprecedented selloff that the equity market has seen since February. But instead of breaking his brains over that, he simply switched off his trading terminal and is cooling his heels.

“We are doing nothing,” Merani told ETMarkets on Tuesday. “My investment portfolio took a severe hit in this selloff and volatility hit the roof. This fall was something that is not comparable with anything that happened in the past. So, it’s best to sit on the sidelines and wait for the comeback,” Merani said.

As Merani spoke to us, the BSE Sensex rallied 1,028 points on Tuesday on positive cues from global markets. Yet, the domestic equity indices ended the January-March period down 29 per cent, as a major meltdown wiped off a whopping Rs 42 lakh crore in market capitalisation of BSE-listed companies.

Nooresh Merani is still holding on to his high conviction stock bets.

Watch: It's 2008 Redux for this Mumbai trader

Asked how he was keeping himself busy through this 21-day lockdown, Merani said he was spending quality time, watching movies with his twin boys and binge-watching some of his favourite series on Netflix and Amazon on an iPad.

Merani has a strong fan following on Dalal Street, with one social media account showing over 52,000 followers.

PM Narendra Modi on March 24 announced a 21-day nationwide lockdown to contain the spread of the coronavirus pandemic. As of Wednesday, India reported nearly 1,600 coronavirus cases with 52 deaths.

Merani says while his trading terminal is off, he is watching some of the fundamentally strong companies, whose stocks have become very cheap. “We are doing broadbased market analysis, trying to understand which companies survived such crises better in the past and seeking to guess-estimate when the parameters will start improving for the markets. We will start adding stocks only when the ongoing trend changes,” he said.

Data available with Ace Equity showed some 550 liquid stocks on the BSE have declined 50-93 per cent since January 20, when the BSE Sensex hit its all-time high of 42,273. On Wednesday, the index ruled around 28,430.

“Once volatility subsides and when the market stops behaving crazily, we will start buying again,” he said. India VIX index, the volatility barometer often referred to as the fear index, recently hit a multi-year high to top the 80 mark in March.

Merani says this is not the first time he was sitting on the sidelines during a selloff. In 2008, when Sensex and Nifty have cracked over 60 per cent from their peak levels due to the Global Financial Crisis, Merani and his team adopted the same approach.

“We did nothing for six month after October 2008,” says he.

“Panic and margin selling weigh on market sentiment around such times. When you try to re-enter during such a phase, there is never going to be a margin-buying scenario. Therefore, even if you are late, it will be very early in terms of the trade. Absence of margin buying ensures that there is no mad buying into a stock when it begins to look up. So, you get some time on the sides,” he said.

Asked if he has any estimate where the market might find a bottom, Merani said the market fall might eventually look like the 2008 crash, and that would be the bottom.

The BSE Smallcap and Midcap indices plunged up to 80 per cent during the selloff between January 2008 and March 2009. These two are currently down about 50 per cent from their respective highs, scaled in January 2018.

“I would compare the ongoing fall with the stock crashes seen in 2008 and 2003, when Nifty took time to bottom out, but a lot of stocks started rallying,” he said.

And then he wraps up the discussion with a little wisdom. “It may not be safe to rely only on fundamentals in such conditions. They work only in a stable market.”
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