Do it yourself

 An impromptu discussion with my friend, & favourite fund manager, yesterday was quite disconcerting. We raised some pertinent questions and tried answering those questions with even more pertinent questions; the answers though remained elusive. The discussion started from my yesterday’s note ( see here ) which highlighted that despite signs of recovery, India’s GDP may contract in 4QFY21 and may barely grow at 1% CAGR during twp year period (FY20-FY22). Also, some suspect, FY22 may also not be as good (10%+ yoy growth) as presently anticipated. Some of the questions that did not have clear answers were— ·          How could market be excited about cyclicals, especially commodities, with 1% CAGR growth over FY20-FY22? ·          If logistic constraints are leading to higher commodity prices, should investors be not worried about manufacturers who face raw material shortages, higher input cost ...

 From the queries I receive from friends and readers these days, one thing appears certain – these are most challenging times for small and HNI investors, especially those who decided to raise substantial cash in their portfolios last spring as the pandemic fear gripped the markets. Many of these investors are not convinced about the sustainability of current stock prices and continue to expect a sharp correction is in the offing. Nonetheless, they find the daily rise in stock prices alluring and difficult to resist. In this intense struggle between their convictions, expectations, beliefs, fear of missing out (FOMO) on a secular rally (if their conviction is misplaced), and greed to make some quick money, some of them appear to have already surrendered to their fears (FOMO) and greed and invested in stocks which normally they would have avoided due to inferior quality of management, earnings and/or balance sheet. I personally do not support – (i)      A b...