Kerala had floods. Surat had earthquakes. Market has declines. 27-11-2018
Kerala had floods recently. Big one. Lots of damage. Latur and Surat had earthquakes some years ago. Big damages. Lives lost, property damaged, people dishoused, business destroyed etc. etc. All in Kerala, Latur, Surat, at that time, would have definitely thought that it was the end of the world for them. But a few months later, things started coming back slowly to normal. Repairs undertaken, aided by govt grants and social organizations pitching in, support coming thru from other regions by way of food, clothing, shelter, money etc. Life came back to normal slowly and in Latur and Surat the earthquake is an event past, something to recount in conversation to those that were not part of it. Kerala will also be the same in a few months. Schools and colleges will be repaired, the govt machinery will continue to hum and businesses will be back. Life goes on.
Point here is that setbacks will occur. The extent of damage will vary from mild to heavy to Kerala. This is the norm. And then order will get restored. That too is the norm. So, we need to think, should we really be treating setbacks as something that will go on forever? As an end of that world, as it were? If setbacks are all temporary and life returns to normal, isn’t our reaction to the event therefore really the issue? My reference here is to the way that most people are dealing with the current state of the market. Reacting to it as though this decline is going to permanent, as though it will continue to inflict unending damage to their portfolios!
Markets have been around in India since 1865 and they are still functioning very well. Ups and downs are part of the process but eventually, they all end. And prices are back in their uptrend. The simple thing to see here is that the pathway of the market is, almost always, upwards. The reason is that every new year exceeds (or at least tries to) the achievements of the previous year in making things better. Every generation makes advances of whatever has been done by previous generations. Every era has its own set of geniuses who propel everything further and higher.
Market is no different. I have been a part of this market even before the Sensex and Nifty being computed. I was delirious in 1984 when the Sensex recorded a bull market peak of 664. Yes, you read that right- the bull market peak was lesser than what we see today as a single day fluctuation of the Sensex! At that time we thought we had maxed it! And when the Sensex fell to 390 (really!) in Mar 88, we thought it would never end the decline. From that low, the Sensex has moved nearly 100x!!! Is that something to note or what!
Those that bought the lows back in 1988 or the dip lows in 2001 or more recently 2008 and 2013 are all looking at the current market with glee. Because they know they are seeing yet another opportunity that made them insane wealth from the past. But for those that only look at the highs, the lofty levels where they bought their stocks and believed declines could never happen, the current market looks dangerous, an endless downward spiral that will take them to the cleaners, wipe them out. Like I said earlier, it is always our response to how things happen that decides our viewpoint. But if we detach ourselves a wee bit and read that bit about the markets being around since 1865 (and still going strong), then perhaps we may be in with a chance to change our viewpoint! The closer your face is to the screen, the larger the image that you see. Currently too many have their noses stuck in the screen and so the decline seems draconian.
If you detach a bit, you will also see that Inflation continues to be benign at 4% while 10 year bonds are at 8%. So we have real interest returns. You will see that we had a bit of a scare about the GDP when oil flared to $75 but now with it back at sub-60, that scare should ease. So, in all probability, the 7+% growth that we have been achieving for GDP growth should continue. Manufacturing activity, Agricultural growth, Industrial growth, Food grains production, Construction activity are all showing positive trends. (That is what the RBI is saying, not even me!) You have FIIs pulling out money, yes, but the DIIs are more than compensating. And, the inflow into their coffers doesn’t seem to be diminishing.
If you insist on doing so, you can question the continuance of every single one of the above positive factors with a What if….? That’s why I quoted some history before coming to these points! Setbacks come and go but life ticks on forever. So will markets. What if.. Is a waste of time and the wrong focus. I saw bear markets in 1982, 1987-88, 1993, 1998, 2001-03, 2008, 2013 and 2016. Had I just held my nerve and bought each of those declines, I swear, I would never ever have to worry about money for a couple of generations perhaps. Fortunately, realization struck somewhere along the line and one stopped saying What if…………..? And life became better!
So, we come to the main point of this write up- which is, the current fall, hard as it may have been to endure, will also pass. And like all the former ones, it will have thrown up opportunities, which, when you look back in 2022, would seem like a dream! Are we looking for them or are we too caught up in the whorl of bearishness gripping the sentiments? History is a great teacher provider you are ready to be a student. Every few years, the market gives us a chance to become humble students, to learn from history, to correct our current thinking, to redirect our focus in the right direction. It is incumbent upon us to seize that chance. Almost everyone has the money. What they lack is the will to invest it at the right time. Today’s victors are those that worked up that courage during past declines.
Think about this- are you going to be one of tomorrows victors? For that, you have to act today about Kerala Flood