In a recent interview, veteran investor Govind Parikh shared insights on market crashes, risk management, and investment strategies. He recalled the 2008 crisis, where his portfolio dropped 75%, teaching him the importance of keeping cash reserves. He emphasised patience, selling in overheated markets, and avoiding emotional investing. Parikh also highlighted the difference between short-term corrections and bear markets, stressing long-term vision. Optimistic about India's growth, he believes disciplined investing and liquidity management are key to navigating market cycles.
Veteran investor Govind Parikh recently shared his insights on market crashes, risk management, and investment strategies in an exclusive interview. With over four decades of experience in the stock market, he highlighted key lessons learned from past downturns and emphasised disciplined investing.
Discussing major market crashes, Parikh identified the 2008 financial crisis as the most severe, recalling that his portfolio lost 75% of its value despite holding fundamentally strong stocks. “Liquidity had dried up completely. No matter how good the stock, there were no buyers,” he said. The crisis reinforced the importance of maintaining cash reserves, a principle he has followed ever since. Today, he and his son, Chinmay, keep at least 10% of their portfolio in cash to capitalize on market corrections.
Reflecting on the 2020 market crash, Parikh noted that the lessons from 2008 helped him navigate the downturn. “Having cash in hand allowed us to deploy capital when valuations became attractive,” he explained. The pandemic-induced crash, while sharp, was followed by a swift recovery, rewarding patient investors who invested strategically.
Parikh also stressed the importance of selling during euphoric market conditions. He said that “When valuations become excessive, we gradually exit positions—even in quality companies,”. He cited instances when overheated markets led even inexperienced investors to jump in, which he sees as a sign to reduce exposure. “If everyone around you is talking about stocks, it’s time to be cautious.”
Addressing the difference between a short-term correction and a bear market, Parikh explained that a correction is often a temporary dip caused by sentiment, while a bear market is marked by prolonged economic distress. “A one-year decline doesn’t worry me because we invest with a five-to-seven-year horizon. Patience is key,” he said.
On stock selection, he warned against overpaying for even the best companies. Citing his investment in Bosch, he explained how he gradually sold when the stock became overvalued. “If a stock’s valuation is unrealistic, it’s better to exit than hold blindly,” he advised. Parikh follows a systematic approach—buying when valuations are low and selling when they become excessive. He emphasized that emotional investing is a common mistake, urging investors to remain rational and wait for the right opportunities.
Looking ahead
Parikh remains optimistic about India’s growth prospects, citing emerging opportunities in technology and private sector investments. “The key is to stay disciplined, maintain liquidity, and always be prepared for market cycles,” he concluded.
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