investors, especially those in IPOs, are ignoring valuations and focussing solely on short-term gains. This behaviour, according to Devina Mehra, Founder, Chairperson and MD, First Global, reflects the ‘Greater Fool’ theory, where investors buy stocks not because they believe in the company’s value, but in the hope that they can sell to someone else at a higher price.

However, this always ends badly, she says.

Mehra advises investors to book profits in mid-, small- and micro-cap stocks where they have already made good returns and invest that money in building a steadier portfolio.

Mehra believes it is pointless to wait for foreign institutional investors’ (FIIs) inflows and chart market direction based on that as there is absolutely no correlation between FII flows and market moves.

“if you look at the data, there has been historically no correlation, and that is even at a time when domestic flows were not of this kind. In fact, the domestic mutual fund industry did not exist. FII money started to come into India around 1994 and 1994 to 2003 has been the only nine-year period in Sensex’s history where the net return was zero. So it is as uncorrelated at that,” she noted.

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Among sectors, she’s overweight on pharmaceuticals, auto components and IT.

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She has been overweight capital goods for three years. “Now we have been cutting because many of those stocks did well. So we will be marginally overweight,” she said.

Mehra is also closely watching the fast-moving consumer goods (FMCG) space.

It might be a positive cycle for FMCG earnings because the food-related costs are going down, and oil-related costs are going down which are the main inputs for the FMCG pack, she mentioned.

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