Given the anticipated high returns in 2020 and 2021, it was easy to see that the markets would deliver impossibly large returns.
Irrespective of the performance of the company’s fundamentals, the stock price during the past two years reflected no sign of caution, but now this is not the case.
Many of the classic investor biases are finally coming to fruition. Loss aversion bias and herd mentality are two of the most important factors in creating panic.
Over the past 400 days, markets ensured that weak hands were eliminated and long-term investors remained in the markets for long periods.
We see most of our investors staying put and strengthening their portfolios through frequent capital injections. They also interact with us with a positive outlook.
We believe that investors feel more comfortable talking to their wealth managers than they do with us.
Investors are more likely to invest long term if they can address their fears about market volatility by understanding fundamentals and macros.
The fin-fluencer community has seen a rapid increase in social media usage, compared to 5 years ago. This has led to greater awareness for investors.
This is normal, even though panic is evident in the markets. Thanks to fin-fluencers, who can apply economic logic to today’s market scenario and present it in a captivating manner to their audience.
We are receiving many large family offices that want to increase their allocation.
This is the most intelligent capital. They are well-versed in the Indian economy and business environment because of their extensive experience managing large businesses.
Ironically, investors are discouraged from investing aggressively in capital markets. They invest more aggressively at peak times, while being less aggressive at bottom.
New investors are discouraged from investing right now, having seen the market decline over the past six months. When we see positive news or events, and markets reverse, most of them will be more aggressive with their allocations.
Investors must understand that markets are usually 3-6 months ahead than fundamentals. This means that investors can get a large additional return on equity investments by making a decision to invest. Market prices can be in a recession for an average of 116 days before the actual recession takes place.
The same thing happened with the Indian markets. It took them only 25 days to reverse their course after the Covid-19 market correction.
If everyone is talking about commodities, war, crude oil, inflation, and other bad news, it is likely that the market bottom is approaching. The markets are where most of this bad news is priced.
Euphoria, or chaos, is what the bond markets first price, followed by the equity market. Our analysis shows that most of this chaos is baked into equity indexes.
Consumer sentiments are at an all time low due to the increased cost of living. This is normal.
Economy are cyclical. A recession in the west is a part of that cycle. Inflation is the word of the year.
Central banks around the world are increasing interest rates and hoping for soft landings.
Most, if no all commodities, have experienced significant corrections. Crude Oil from the United StatesInflation is expected to slow down if stockpiles provide encouraging data.
As a matter-of-fact, inflation will peak in the next three month and consumer demand should rebound.
We also anticipate that the supply chain problems will be resolved quicker after China reopens. Latest PMIData reflect the same.
Once the dust settles, the market is bound to reflect India’s reality. Indian markets will experience the greatest recovery due to their fastest-growing middle class and large economies that are growing at the fastest rate in the world.
Our conviction is further strengthened by Atmanirbhar and China plus one. The management of large portfolio companies is filled with optimism. There are no signs of stress on the ground performance.
We should see most of the currency appreciation now. FPIThey return to see how the economy manages inflation.
Leverage on the balance sheet is low and we can see the cushion to capex and expand along with China plus 1. Aatmanirbhar Bharat.
In the medium-term, it is all good. US MidtermsThe next important point for the market should be:
(The author is the founder of Green Portfolio.
(Disclaimer) Recommendations and suggestions made by experts are their opinions. These views do not reflect those of Economic Times.
