From the Executive Editor’s desk
A remarkable feature of a storm is that while the outer layers of the storm would be tumultuous with huge destructive potential, the eye of the storm – the center of the storm – would be a relatively calm place. Those who stay in the eye of the storm are unlikely to be affected. This lesson from nature has implications for financial markets. Financial history tells us that those investors who keep calm during turbulence make money when the turbulence inevitably ends. On the other hand, those who panic and flee from the market during challenging times, lose out.
There is no storm in the stock market now. But there are some strong gusty headwinds. Till Pulwama, the main known challenge for the market has been the uncertainty associated with the general election outcome. Post Pulwama, the geo-political situation has turned for the worse. There is a risk of escalation of tensions between India and Pakistan. This is a short term negative for the market since investors, particularly FIIs, will be in a wait and watch mode. This, coupled with the lack of clarity on the election outcome, will pose challenges to the market in the short-term. The Q3 corporate results also indicate continuing weakness in earnings growth.
During challenging times, it is good to remain calm. If we study the journey of the Sensex from 100 in 1979 to around 36000 now, we can see periods of great turmoil: assassinations of two prime ministers, separatist movements, extreme political uncertainty, serious natural calamities like droughts, floods, tsunamis and earth quakes, communal riots, the Kargil war, terrorist attacks and serious economic crisis like the Balance of Payments crisis of 1991. After all these crises, which had serious short-term impacts on the economy and market, the Indian economy today is the sixth largest economy in the world and an emerging economic super power. Indian entrepreneurs grew hundreds of successful businesses. And the stock market created phenomenal wealth for investors when the Sensex multiplied 360 times in 40 years. The message is clear: stay calm during turbulence; invest systematically in quality stocks/mutual funds. Storms are temporary; they will pass.
As the Ryan Stevenson song goes:
“In the eye of the storm
You remain in control”
Those who sail in the turbulent seas will get the catch. It is important to remember that ships are safer than boats when the sea is turbulent. That’s why large-caps are riding the storm well. But when the turbulence passes and calm returns it will be safer for boats to charge. Those who are adventurous, and can anticipate the return to normalcy soon, can charge now.
This issue of Geojit Insights has an article on market outlook by the renowned fund manager Mahesh Patil, Aditya Birla Sun Life AMC. Cover story is on “Thoughts to build on”. There is a detailed analysis on the market scenario and investment outlook by our Head of Research Vinod Nair and Smart Talk is by Murthy Nagarajan, Head Fixed Income, TATA AMC. Happy reading!