Diwali was a quiet affair on Dalal street. Unusually, the markets fell on the mahurat trade. Investors seem more unsure than ever about which was the sentiment will swing. The usual gyaan from the market wizards did little to investor confidence. So, why are investors fighting shy of equities? Are markets really overvalued? Let us look at the Sensex to get a sense of valuation. If you remove HDFC, Hindustan unilever and ITC from the Sensex and arrive at its valuations, you will find the Sensex is trading very close to its long term bottom. The fact that FII inflows went after index funds has tended to distort valuations of these three bellwethers. Investors only need to look beyond the obvious to realize that markets aren’t really pricey.
The stock market is a barometer, not a thermometer.
Reading is a constant in an investor’s daily grind. Perspectives evolve, ideas emerge and conviction grows when an investor reads the right things. In bear markets, reading about value investing is an obvious choice. Reading about the lives of three of the greatest value investors of all time, one noticed that all of them lived to their nineties. They worked till the very end and loved what they did. Investing didn’t lead to their burn out like it afflicts modern day investment bankers. They learned to doubt hype, disbelieve myths, thrive on external panic and carry a cool head through their lives. Wealth creation was a process where there was no place for extreme emotions. These are times to evolve and raise the quality of your investment thinking. Returns will follow you.
Every correction is a buying opportunity.