They're simply following experts' advice despite rising stock market

The Sensex soared 520 points to close at 14,110 yesterday yet, small retail investors are cautious in their approach. "Brokers and Foreign Institutional Investors (FII's) are hand-in glove with each other. Therefore, the retail investors don't want to burn their hands," said Narayan Bhatt, a retail investor.

Tips from experts

He pointed to the advice from market experts warning retail investors against getting into the falling market, keeping in mind strong fundamentals and a time horizon of more than a year.

Deven Choksey of KR Choksey Securities said, "Retail investors should invest in the falling market if the fundamentals are strong and keep a one-year plus horizon."

Have clarity

Quantum Securities' Sanjay Dutt felt that investors should have clarity on what they are holding in their portfolios. "For very short-term trading calls, one could buy into these panic falls and sell with marginal profits," said Dutt.

Confirming this trend among the small investors, Bhatt said, "Small investors are buying shares of mid-caps (companies with a market capitalisation of $2 billion to $ 10 billion) and then selling them even for just Rs 1 or Rs 2 as profit."

More good news

Retail investors have now set their eyes on today's Union cabinet expansion. "The markets are expected to go up further. FIIs are expected to move 30 to 50% of their portfolio from large-cap (above $10 billion) to mid-cap stocks. For investors who had as much as 20-40 % cash levels in their portfolio are being asked to invest this money in equities," a leading brokerage firm said.

Another economic paper said that the election results were unexpected. "The sentimental boost is only driving market indices northwards. Such a rally cannot be explained on fundamental base. Correction is very much expected but not massively," it read.

Be careful

Another retail investor Vipul Shah explained that companies that are perceived cheap and have lesser valuations would benefit. "Try and get little more defensive on the portfolio since the momentum is breaking but one needs to be very careful," said Shah. He said adding that retail investors need to stay invested, stick to quality and buy stocks which they would understand.