Don't Go Buying Every Stock That Is Down 40-50%, Warns Prominent Indian Investment Banker

Despite the subdued global cues from the foreign markets, the Indian stock market has given a pretty decent return of almost 13% to investors in the past month. However, Hemang Jani, the equity strategist & senior group VP of Motilal Oswal Financial Services — an Indian Brokerage house — has warned Indian investors to be cautious while investing.

In an interview with the Economic Times, Jani said, "Don't buy everything which is down 40-50%, it will be good to filter out some names where the business model looks a little better, the management pedigree is better, or one can also look for a two-three-year kind of investment in some of the names."

According to Jani, the risk appetite is back, and the investors are now looking toward "some of the beaten-down names." He further added that though there is an appetite in the market, one should be a little more selective about what they are getting into from a trading perspective, or even from a long-term perspective. 

Meanwhile, the Indian markets were trading lower on Wednesday (Indian Standard Time), tracking cues from the global markets. U.S. Treasury yields rising to multi-year highs was a major market driver as investors braced for the possibility of aggressive monetary tightening by the U.S. Fed. 

This came after JP Morgan's managing director and head of Asia-Pacific equity research James Sullivan yesterday, in an interview with CNBC-TV18, said that the Indian equity markets look fairly priced, if not expensive, at current levels. He also indicated that the earnings outlook is very demanding, and there is a risk of disappointment on that front. 

Echoing a similar note, Nithin Kamath — founder of retail stock brokerage Zerodha, which is often dubbed the "Indian Robinhood Markets Inc. (NASDAQ: HOOD)" — said he believes it is important to have a good mix of fixed income or debt and equity to be on the safer side in times of drawdowns.

Several stocks popular with retail investors in India like Paytm and Zomato have significantly plunged this year. Paytm is a fintech company backed by Wall Street veteran and Berkshire Hathaway Inc. (NYSE: BRK-A) (NYSE: BRK-B) Chairman Warren Buffett — its stock has plunged 52.7% this year.
Food delivery, dining and restaurant discovery startup Zomato, which acquired Uber Technologies Inc.'s (NYSE: UBER) Uber Eats business in India, is down 40% year-to-date.