Riders on the storm: Newbie investors get a dose of reality

As market veterans know well, such epiphanies are disturbingly common during a bear market. But for Verma and millions of other investors who are seeing their first-ever real downturn, some lessons have to be experienced before they are understood.

Pain and profits

For Shivangi Jain, a working mother with a background in public relations, investing is something of a family heritage. Her father has been investing in the stock market even before she was born in 1992, and he keeps telling her numerous stories about the Harshad Mehta scam, market crashes and other gory tales.

Hearing stories is one thing, but to actually live through a market correction is a completely different experience, as she later found out.

Shivangi, who lives in Mumbai, began investing on her own just before the pandemic. She started with some blue-chip names but later joined a few stockbroking WhatsApp groups, which widened her horizon (as well as risk).

This was also the time of the initial public offering (IPO) mania in Indian equity markets and Shivangi began applying to these initial share sales, first in the retail category and then in the high net worth individual (HNI) segment, with investments of ₹10 lakh and above.

She initially made handsome profits in some IPOs (often called gambler’s luck by envious people), but for the past six months or so, her portfolio has been in the red.

“My portfolio has been drastically down almost 20%. Most of my loss-making companies are recent IPO listings, including SMEs as well. I honestly think Sebi (Securities and Exchange Board of India, India’s market regulator) should not allow any and every company to raise public funds or be very stringent with their due diligence during DRHP filing. People’s money is at stake,” she said.

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Maybe that’s how fate tempts people it has her eyes on – a relatively smooth beginning, which finally culminates in a costly lesson.

Surat-based Krunal Shah would agree.

Shah completed his MBA in human resources in 2021. Thanks to half of his classes being online due to the pandemic, he had a lot of time on his hands and decided to delve into technical analysis and price action.

He then rushed in where even veterans fear to tread – futures and options (F&O).

“I started F&O with a capital of ₹60,000. I figured the game is about having discipline and so placed my bets accordingly,” he said.

However, he soon experienced his first loss of around ₹20,000.

“I put an extra ₹50,000 to recover losses. From there, I didn’t lose much money, but my job had started, so I focused on that. Overall, I made around ₹15,000 loss on around ₹1 lakh capital,” he said, adding he considers the loss as “tuition fee” for learning about markets.

After a lengthy cooling off period, the market bug bit Shah again around July last year.

“I started learning this approach called Elliot wave. For that, I had joined a class in Surat itself. The class was from a Sebi-registered research analyst.”

Shah started investing ₹7,000 per stock. He put in money in 15 to 17 stocks, translating into a portfolio of about ₹1 lakh.

It was not the best time to invest.

“Right after I started investing, I started losing money. Just last week I completely cleared my portfolio with a 20% loss,” he said.

Last year, he also applied for a few IPOs. The trigger for this was the company he worked for— it went public.

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“I wanted to take my chances and ended up making profits. So I started applying in a few more IPOs from there.”

His strategy was to look at the grey market premium before investing and flip the shares after listing. However, most of his portfolio comprised small- and mid-caps, which inflicted heavy damage once the current market downturn started.

Shah now sounds a lot wiser.

“I realized this is not how I should invest my money; I should go with mutual funds (MFs) if I can’t research stocks thoroughly. From the beginning, my dad was telling me to invest in MFs, but I ignored him completely.”

Shah now invests in MFs (that too passive funds) split across market cap and also has exposure to gold and silver. Probably a lesson well learnt.

Blue collar blues

For 41-year-old Mohan Kumar, spotting the silver lining has been a self-taught skill. Kumar worked as an office boy for many years at an establishment in Mayur Vihar in east Delhi, earning around ₹20,000 per month, before he suddenly lost his job at the onset of the pandemic. Confined to his rented accommodation and with nothing to do, Kumar decided to dip his toes into something he was introduced to at his job.

“At our office, the TV remained on during the entire day, where business news channels played on loop. It is there that I first came to know about the share market. I found that very fascinating,” he said.

Kumar had opened an online brokerage account while working at the office but did not buy any shares.

“I was still hesitant. But when I used to hear the employees talk about how much money they made on some stock, I too wanted to invest,” he said.

The lockdown and the abundant free time made him pull the trigger. His stock selection methodology was remarkably simple – he just bought what the TV channels recommended on their morning show.

“I made some nice money and sold some shares in 2022. With those funds and some loans from friends, I have purchased three e-rickshaws, which I have given on rent. That is my primary source of income now.”

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However, his portfolio of about ₹1.5 lakh is down 20% currently. The clutch of mid- and small-cap stocks he bought recently have turned out to be major disappointments. Kumar says he is waiting for them to recover so that he can exit and pay off his loans and maybe buy another e-rickshaw.

A similar arc of boom-turned-gloom played out with a 23-year-old wedding photographer in Greater Noida. He didn’t want to be identified.

The person, whose parents are small farmers in Bulandshahr, was hooked on to intra-day trading along with his friends, all of whom follow many ‘finfluencers’ on social media. He is also a member of multiple Telegram channels which provide stock tips for ‘guaranteed returns’.

The photographer made 30-40% gains in a few weeks on some microcap stocks, which convinced him to keep the money invested for the long-term (which he defines as 10-12 months).

However, he was forced to sell some shares in losses to pay for some medical expenses in his family. His portfolio has shed nearly a third of its value— this proves that “the stock market is a rich man’s game”, he concluded.

“Everyone says wait for the stocks to recover, but who will fund my emergency expenses? I anyways don’t have a regular income during off-season (when there are no weddings), so I will have to sell irrespective of whether I’ve made money on those stocks or not.”

This person has not told his parents about the losses as his sister is supposed to get married this year, which will entail a huge expenditure. He said he is hoping for his stocks to recover before the wedding.

Socio-economic privilege is often an overlooked factor in investing. A 30% drawdown in portfolio is a cortisol-spiking event for almost anyone, but those with the cushion of cash and steady sources of income are better able to ride out the bouts of volatility. The rest just slip through the cracks.

Preparation meets opportunity

To assume that every new-age investor has been stumped and rightfully humbled by the market would be both naive and a severe underestimation of their capabilities.

Take the case of Kolkata-based Gaurav Mahidhar.

Mahidhar, who works in his family business of radiator manufacturing, began handling his family’s investments (which were mostly MF holdings) in 2017. But he always yearned for the real deal.

“I used to look at charts and imagine when I would get a chance like the global financial crisis of 2008 to buy stocks at cheap prices,” the 32-year-old said.

His prayers were heard when the financial markets were jolted by the pandemic, which is when he jumped into direct stock investing.

“Also, my MF investments did not do well in the previous cycle as it was predominantly a small-cap fund. If you remember, around 2018, the small-cap universe was struggling. I saw the stock holdings in the MF and thought I could have done better than the fund manager,” he said.

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It was not as if Mahidhar rushed into battle without adequate preparation. The BCom graduate and chartered accountant dropout read a lot of books by market legends like Warren Buffett and Howard Marks, devoted hours every day to stock research and also attended management concalls to understand the business.

Which is why the recent bear market did not fluster him as much.

“It was not actually the first time I was seeing red. During the Russia- Ukraine war, my pharmaceuticals and consumer stocks took a huge beating. Both had done very well in 2020-2021, but in 2022, due to egregious valuations, they fell a lot.”

It was this focus on fundamentals like valuation which made him keep a part of his corpus in cash in September 2024, which capped his losses.

“I thought the valuations were out of whack. I was also not invested in the whole defense thing, the infra thing, and what was hot in the last two years,” he added.

From the September peak, his portfolio had plunged 23% at one point, but is down around 12% currently. However, he is not too worried and says he will wait out this downturn.

Mahidhar also had some words for those who are in the habit of underestimating the young generation.

“I hear a lot of people speak about post-covid investors in very derogatory terms, saying these first-time investors haven’t seen market cycles, can’t make proper decisions etc.,” Mahidhar said. “I still remember during 2020, there were panelists in different news channels who were saying this won’t end well for the retail holders because retailers were pumping in quite a bit of money during that time. But with hindsight, if we look at it, we were right in pumping in the money. We made it…Things are not as bad as they seem.”

Moth to flame

One of the biggest trends in the Indian equity markets over the past few years has been the growing participation of retail investors, especially youngsters. The proportion of investors under 30 years has increased from 22.6% in March 2019 to 40.2% in January 2025, according to NSE data.

But youthful exuberance can also have a downside, as reflected in the undercurrents of FOMO (fear of missing out) and YOLO (you only live once) in various pockets of the market. Mint spoke to a wide spectrum of post-pandemic investors in multiple cities and some clear trends were conspicuous.

Firstly, a majority of investors who rushed in to catch the latest fads burnt their fingers. Secondly, those who stuck to quality large-caps and MFs fared relatively better. There were also some cases of active stock-pickers who took the right call by avoiding over-heated segments in 2024, sticking to the basics and having a long-term perspective.

Experts say during such periods of market gyrations, focusing on the fundamentals will serve retail investors well.

“Volatility is a feature and not a bug of equity investing. When investors invest in the equity markets, they should expect periodic quotational losses as markets fall from the highs,” Rajeev Thakkar, chief investment officer of PPFAS Mutual Fund, told Mint. “As long as investors keep their SIPs going in diversified equity funds or in index funds over long periods of time, they should expect to participate in the growth of India’s economy and in the corporate profit growth.”

Also, while everyone is a genius in a bull market, it is only during periods of prolonged drawdowns that many people realize that stock picking requires experience, skill and dedicated efforts.

“Always remember that the equity market has the ability to humble anyone so venture into equity as an asset class and especially into direct stocks only after proper research. Also, for risk management, keep aside money for short term goals and emergency needs and don’t use leverage to invest into equity,” registered investment advisor Abhishek Kumar said.

First-time investors should consider investing through equity MFs instead of direct stocks to test their capacity to go through market cycles.

“Also, allocate money into equity only after assessing your risk appetite so that the downturn in equity doesn’t impact your mental peace. Equity investment has the potential for better risk-adjusted return compared to other asset classes only if one manages the risk associated with it really well,” he added.