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Business dynamics changing, some firms will die, be careful in stock picking: Porinju


Indian equity market is not at all in the bear phase and the recent correction is an opportunity for stock picking, says Porinju Veliyath, Founder & CEO of Equity Intelligence. He was addressing an investors event in Kochi.

He said the ongoing correction in midcap and smallcap stocks is quite normal and the market had witnessed it many times earlier also. The BSE Midcap and Smallcap indices are down up to 14 per cent on a year-to-date basis till June 22.

Porinju said India can become $5 trillion economy over next five years. There is a need for political parties or politicians to come together to support the process of reforms the way they are now joining hands to defeat Prime Minister Narendra Modi.

“India does not belong to Narendra Modi or anybody. We need very credible and capable leaders supported by all political parties. We will see exciting growth ahead if we can have such a situation,” Porinju said.

Uncertainty and high valuation triggered the recent correction in the market. The recent volatility in midcap and smallcap stocks is not linked to global cues, he said.

Porinju advised investors to focus on the business models of companies before they pick a stock.

“Many companies and businesses, which were blue chips in last 50 years, have all of a sudden become irrelevant. We are going through that phase. Many companies are going to die. Companies do die, but this is something very unusual. Comoanies are going out of business in mass numbers, especially in the midcap and smallcap segments. We have to be extremely careful in stock picking,” Porinju said.

Value investing mostly is wisdom and common sense and investors should learn lessons from the kinds of falls that the market has witnessed in the recent past.

“It is an ever-learning process. Once you feel okay I have been making so much money in last five years, at 45.2 per cent CAGR, then it is something waiting for you,” said Porinju.

If you want to participate in Indias growth in a safe manner, investors shoukd pick up those blue chips which can deliver assured kind of growth going forward, he said.

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