Investing Isn’t Just About Buying, Says ICICI Prudential MF’s S Naren

That’s according to S Naren, executive director and chief investment officer of ICICI Prudential Mutual Fund, who spoke to BloombergQuint about the biggest investment lessons he has learnt, in the context of the current market and economic environment.

Most conversations and investment theories talk about what to buy and when to buy, but sizing—which is how much to allocate to a particular stock—and when to sell are equally important, he said.

Naren said individual investors are in a very good position right now since only five out of 100 stocks are overd. The remaining 95, which are cheap, are likely to do well over the long-term. This is because India’s equity market is likely in the earlier stages of a boom and bust cycle. An investor can comfortably make systematic investments in small and mid cap stocks right now, he said.

He stressed that cycles would determine the extent of wealth creation, and rued that investors don’t give enough importance to asking about where in the cycle are the markets. “Forget investors, when I meet (company) promoters in the course of their job, I ask them what are you doing,” he said, adding that when he advised them to not make acquisitions at the peak of a cycle, the response he got was “very, very interesting”.

While India’s market may be at the “boring stage” or before, Naren estimates that the U.S. market is close to a bubble. He cited the example of the “Robinhood culture”—sparked by the eponymous trading application, among others—that motivates everyone to invest in U.S. equities, as lead indicators of caution in the U.S. markets.

The best way to check cycles is to look at charts, and that too in a non-conventional way, the veteran investor said. “I don’t use charts in the conventional sense to do some complicated calculations of resistance and support. But if there is a share at 52-week high, I will say let’s sell some stock.”

Watch the full conversation here.