Invest Differently


Another exciting trading week saw several companies trip and lose significant valuation. This trend has become almost routine. Week after week, we are seeing more companies trip up.

Naturally, this has a significant bearing on sentiment. As this almost starts to look like a trend, the negativity is spiking sharply. But, the Nifty shows no signs of the carnage happening in the broader market. In fact, the Nifty even cleverly masks the bloodbath within itself. Excluding a handful of performing companies, the Nifty has actually suffered a significant fall.

But, most people seem to miss this important aspect. The concept of benchmarking investment performance also sees most investments compared constantly with the Nifty. We often see lay investors and expert analysts alike constantly harping on about outperformance to Nifty. But, when an index is showing maximum skew within itself and concentration of investment performance is from a few scrips within itself, this should not be viewed as a strength. Actually, it is a sign of vulnerability of the benchmark to a few overvalued companies.

If we go back to previous bull runs, the temporary strength derived from a few companies eventually led to the fall of the indices itself later. This is possibly a time to think beyond just broader Nifty outperformance and focus on building stronger portfolios which over time will deliver investment performance.

The road to future returns is going to be less travelled.

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