Do it yourself

The market action in the past three days has been quite exciting. It reminded me of the market action witnessed during March-April 2020, in the wake of the outbreak of Covid-19 pandemic. Drawing from the experience of 2020, like many, at first, I was also tempted to increase my risk exposure to Indian equities. However, on second thought, I have decided to reign my temptation and avoid any deviation from the “plan”. I note that the 2025-2026 market trajectory may not be similar to 2020-2021, for some very simple reasons. ·          Ignoring the panic fall in February-March 2020 and subsequent recovery, Nifty 50 gained 12% in 2020 and another 16% in 2021. These gains occurred because corporate earnings were coming out of a 10yr growth drought. Nifty EPS has grown over 225% in the past five years (FY21-FY25), against just 50% growth witnessed in the preceding decade (FY11-FY20). The growth trajectory is now moderating and is more likely to stabi...

The debate over whether “equity investing” is an art or science is never ending. There are arguments on both sides, but none of these appear strong enough to settle the debate. Almost all episodes of this debate usually end with the compromising statement - “Equity investment is both an art and a science.” The application of quantitative research and financial models does give it a scientific color. But use of quantitative methods and financial models is highly influenced by the personal preferences, experience, estimates and prejudices of the user. Invariably, the forecasts of fundamental analysts vary based on what parameters they have used in forming their respective opinions. For example, a 50bps difference in weighted average cost of capital (WACC) used by two analysts could give dramatically different assessments for the fair value of a stock. As someone pointed out, fundamental analysis of equity stocks is like navigating a car. While all the cars are designed scientifically, th...

The 2019th year of Christ is ending on an disruptive note. Socially & politically, more than half the country is witnessing violent protests and unrest. People appear anxious and divided. The economy is also witnessing one of the sharpest slowdown in more than a decade. The business and consumer confidence has collapsed. More than half the population is witnessing stagflation, with no to negative change in wages and consistent rise in cost of living. The unemployment is on the rise and manufacturing growth is contracting. The expectations of higher, faster and sustainable growth through political stability have been mostly belied. Geopolitical rhetoric is also higher. The uncertainty over trade conflict and Brexit seems to have eased a bit, but these are far from over. The global economic growth momentum continues to be stuck in slow lane. Despite unprecedented monetary and fiscal support, the growth trend has failed to accelerate in most of the advanced economies. The r...