The bench mark Nifty is trading above the psychologically
important 10000 mark after three months. The benchmark had slipped below the
10k mark on 12th March 2020 exactly after two years. It last traded below this
mark for couple of days in March 2018. The date 12th March 2020 is important
because, this was two week before the nationwide lockdown was announced.
At that time the confirmed COVID-19 cases were less than 300;
much lower than anywhere in the world, and there were no travel or business
restrictions in place. The market panic was mostly due to the problems brewing
in the debt and commodities markets. The earnings disappointment was persistent
and economy had shifted to slow lane many quarters ago.
Obviously, the correction in Indian equities from the all time
high level recorded on 20 January 2020 had started without much regard to the
socio-economic displacement caused by the outbreak of COVID-19. In fact, on
23rd March Nifty closed at 7610, about 39% lower than its 20th January highest
level of 12430. This was a day before the prime minister announced the total
lockdown at 8PM on 24th March 2020.
Nifty has since recovered 34% from the low of 7610 on 23rd March
2020 to about 10100 odd levels yesterday. In view of this wild swing of 40%
down (12430-7610) and 33% up (7610 to 10100), market participants have been
overwhelmed by a variety of emotions.
There are many who got panicked in March, when the market was in
a free fall with little signs of the socio-economic (viz., lockdown) disaster
that was to follow. In panic, they liquidated their equity and debt positions
and moved to cash. Many of them canceled their SIP mandates. The up move that
followed was swift and inexplicable. Most found it to be a dead cat bouncing
around and ignored. Disbelief and regret are the feelings dominating their
sentiments presently.
Then there are others who were already sitting on cash waiting
for a major correction to buy equities. At peak of 12400 they were praying for
sub 10k levels to rebalance their portfolios by increasing the weight of
equities. At sub 8K level they revised their entry target to sub 6000 level. These
people are overwhelmed by the feelings of disbelief and denial. They continue
to believe that this up move is unsustainable and Nifty must make new 2020 lows
in anytime soon.
If someone asks me, I would suggest the following. Though this
may sounds cliché and unexciting, this is what eventually makes a good investor
out of you.
(a) Define your asset
allocation carefully and follow it religiously. By your intelligence you can identify
great investment ideas and earn huge profits. But asset allocation discipline
will make you retain and enhance those profits.
(b) It is easier said than
done, but don't allow the sentiments of greed and fear overwhelm you. A
moderate amount of both sentiments is good because that will allow you to avail
opportunities and avoid disasters. But excess of any one is undesirable.
(c) Indian economy shall
remain stuck in slow lane for many more quarters. The aggregate corporate
earnings shall reflect this reality, as has been the case in past many years.
However there are some businesses which are doing very well and may continue to
do so. Focus on these businesses rather than bothering too much about aggregate numbers or benchmark
indices.
(d) SIP is usually done to
take advantage of sharp market declines. Cancelling mandates at lower level
defeats the very objective of SIP.
(e) In strict technical
sense the present up move has some more distance to cover, before it pauses to
think about retracements. But this all is a jargon for very short term traders.
Investors need not care about this.
No comments:
Post a Comment