We are currently in a market phase where most asset prices are rising. Equity indices (Nifty over 22200) are close to an all-time high. Gold prices (over US$2125/oz) are at an all-time high. Bond prices (benchmark 10-year yields 7.05% from 7.50% a year ago) have recovered from their recent lows. Bitcoins (US$66000) are trading at an all-time high. Real Estate prices in India are also close to their highest levels in most metros.
Prima facie, all investors should be celebrating FY24 as one of the best years in their investment journey. However, a recent interaction with many small (retail) and high-networth investors indicates that for a significant proportion of investors, it may be a “glass half empty” kind of situation.
The common regrets of over 100 investors I spoke to at three different gatherings could be listed as follows:
· They stayed invested with the top-performing fund managers of 2018-2020. However, these fund managers have underperformed materially in the past couple of years.
· They remained overweight in the bellwether stocks like HDFC Bank, Kotak Bank, Asian Paints, Hindustan Unilever, Dabur, ITC, Brittania, Infosys, Bajaj Finance, SRF, UPL, etc. These stocks have massively underperformed Nifty in FY24.
· They either participated aggressively in failed IPOs; or missed successful IPOs: or sold at panic lows; or bought at post-listing euphoric highs.
· They wrote off conventional energy and regret not participating in the massive rally in stocks like Coal India, NTPC, Oil India, NLC, etc. Even though they have made very good gains in renewables.
· They took the advice to invest more in silver rather than gold. Silver has massively underperformed gold.
· Prompted by the semiconductor shortages during COVID-19, many people allocated decent money to Asian equities, especially Chinese and Taiwanese. This part of the portfolio has underperformed in the past three years.
· Some HNIs allocated decent money to US Bonds in December 2023. They were advised that the Federal Reserve shall start cutting rates in February and bond yields could fall to sub 3% level. It seems the rate cut has been delayed in the US and the bond yields are higher YTD2024. That part of asset allocation is giving some jitters now.
· They skipped investing in Bitcoins due to fears of regulatory clamp-down and negative publicity. However, the sharp outperformance of Bitcoin over Gold, USD, and Equities is making them regret it.
· The most common regret was losing money in option trades. Most of them increased their option trading activity by allocating more money. Some did it for fun sake – to get a kick. Many did it to make quick gains. The accumulated losses in options are now material in many cases.
For now, the consensus appears – a pre-election rally in March, higher volatility and range-bound market till May 2024, and a sharp rally post the formation of a new stronger BJP government. The portfolio positioning is aligned with this consensus.
Any deviation in the actual outcome, as compared to the consensus positioning, may see some panic unwinding, in my view. However, if the consensus proves to be right, we might see much higher highs in 2H2024.
