Crashes can make you Richer.

I have always looked at Market crashes as an great opportunity to make Fast Money. But investor needs to have an appetite & psychology to stay the course.

Crashes have returned Massive Money back to investors who braved it. I have picked out some interesting data from BSE Small Caps, Large corrections. 

BSE Small Cap Index, Tanked 34% in June 2004 to 1700 levels from Jan 2004 Highs of 2445, only to bounce back 168% in next 1 year & staggering 354% in 3 years & this feat was repeated on multiple occasion whenever it witnessed a great fall. Well corrections have always been deep & nerve wracking in Small caps, I vividly remember March 2009 was May-hem, investors entire capital was almost wiped out, with 80% cut.

Well coming to the point, in Aug 2019 after an agonising downtrend which continued for over one and half year this segment is buzzing, Its tanked over 40% from Jan 2018 till Aug 2019 & Since then it has been firming up and delivered over 21% returns in past 6 months, Where will it hit needs to be seen ?

It was fear of collapse of the entire financial system (esp. NBFC) which led to precipitous fall in stock prices, especially Mid & Smalls. Hence any sign of stability in financial system will lead to strengthening of battered stocks. Below are the few points which makes a case for recovery of Mid & Small Caps:

• Even a moderate recovery in economy will enlarge optically on low base effect of last Year.
• NIFTY/ SENSEX are trading on there life time highs and at stretched valuation, especially the TOP 10s.
• Friendly taxation measures expected ( DDT/ LTCG) in upcoming budget.
• We still are in low interest rate scenario, despite recent spike in food inflation.

Tactical Allocation: is a short to intermediate-term view that looks for investment opportunities in the market. It plays a important role in generating portfolio Alpha. A tilt towards Mid/Small Space is must for portfolio alpha.

Note: I’m NOT advising to change course of your Asset Allocation, Just a minor tweak in your EQUITY Allocation, if there is a risk appetite.