Do it yourself

One of the basic principles of economics is that no one makes abnormal gains (or loss) from an economic activity over a longer period. The forces of demand and supply tend to attain a state of equilibrium as higher margins attract more supplies and lower margins push the marginal suppliers out of the market. In the short term, however, suppliers can make super profits taking advantage of the demand-supply inequilibrium. Most economic activities thus follow a cyclical path rather than a linear path. This principle does not apply to the states where markets are not free and monopolies with state protection and patronage are allowed to thrive at the expense of consumers. We have also witnessed that businesses that own niche intellectual property rights (IPRs) or ownership of scarce natural resources have defied this principle for a much longer period of time, as compared to the usual businesses. Applying this principle to the current market scenario, I find that the investors may be ignor...

The decoupling of real economy and financial markets in past few months has certainly caught many market participants by surprise. There is no dearth of experts and masters of market who are claiming to have caught the March bottom and minted money. I have no doubts that they might have actually achieved what they claim. However, the publically available evidence suggests that most mutual funds have yielded negative return in YTD2021 and in past one year. The 5year return is worse than the average fixed deposit interest in this period. The investors are thus caught in a quandary - whether they should use this bounce in the stock prices to redeem their investments or invest more money. The problem in fact seems more acute with the investors who decided to play "safe than sorry" and redeemed their investments during March-April and are sitting on the fringes. Many of them are wondering whether it is a good time to invest back in equities; especially when ...