Festivals sans festivities
Multiple headwinds pose multiple challenges to the stock market. Dussehra is just at an arm’s length away but muhurat purchases of consumer durables are still lagging. The pre-festive Diwali cheer is conspicuous by its absence while the online discount sales have hit a record high. This may be a flash in the pan and does not indicate the festive cheer. At Dalal Street, the domestic and global headwinds have raised a terrible storm. Hardly had the dust settled on the liquidity and solvency issues of NBFCs, the US markets nosedived around 800 points in Dow Jones mid-week prompting President Donald Trump to state ‘Fed has gone crazy’!
Torrid times are in for sure and the prophets of Doom are working overtime to raise the stress level of investors and damage their health and wealth. It is not that such times are anything new. The ebb is a natural complement of the high tide and it’s no different this time. The reasons for the low tide differ each time but it fulfills one main purpose – to correct the excesses that had set in. Seasoned investors and wealth creators will vouch for the fact that such phases are not suicidal if your stakes are meaningful and prudent. Obviously such excessive swings at ‘jwar-bhaata’ (high and low tides) are pure outcomes of overleveraged situations.
If viewed objectively, the market pundits who scream of doom and gloom today are the same prophets that flaunted India as the economy of the future. Highest GDP growth amongst large economies, youngest population, huge workforce, rising purchasing power, fast developing infrastructure, etc. Have all these factors changed overnight? Are corporate profits squeezed? Can a country that is striding ahead economically suddenly turn turtle and become irrelevant in the world? Obviously not, such pundits in all likelihood are the ones who have no clue about the market’s future. They alternate between euphoria and despair and earn fat bonuses out of it. Just ignore them as they are equally ignorant about the market trend like millions of other investors! Investors need to negotiate such trying times once again with the confidence of the future. They earn and lose high P/E multiples on account of volatility. Stay put with volatility and let it not influence you negatively. After all, we all know that the markets make new highs and correct only to scale higher altitudes. Investors should be in this game with zeal and enthusiasm and not lose sleep over booms and dooms. Timing the market is nearly impossible. So, we must stand resolute to temptations of buying when the P/E multiple expands euphorically. Similarly, we must not sell when the sentiment turns negative. From a high of 6200 in January 2008, the Nifty collapsed to 2600 in just a few months only to touch 6100 again in October 2010. Don’t let the macro headwinds (domestic as well as global) derail your investment vehicle. Just like every good thing comes to an end, the worst too does not last eternally. Governments and industrialists often prepare to insulate themselves from such chilly headwinds. It is just a matter of time. Till then, enjoy the ‘me too’ movement all over the media. This will at least save you from the unwanted stress unless it turns to ‘you too’!