The markets were expected to fall. Electoral reversals and the surprise resignation of the RBI governor came together to stun markets. Surprisingly, our market shunned these fears and swiftly moved on. Why did this happen?
Indian macros are clearly improving – low inflation, soft oil prices, and better rupee valuation indicate that we have a fair chance to pull our economy out of her problems. The broader markets seem to have sensed the opportunity much faster than the experts. Clearly, there are enough contrarians in every market fall. If FIIs sell, the DIIs buy and vice versa. The competitive intensity in investing is only rising. HNIs seem to be returning to buy their own favourites. Nobody wants to be left out.
But the markets have a mind of their own. One must think forward. Our investment choices must be futuristic. We need to move beyond recent success stories among stocks. While some of them will continue to thrive, several will not be able to sustain performance or valuations. The market leadership is bound to change. We see this in every market cycle. Indices will change composition to catalyse this shift.
Investors must pre-empt this shift and position their portfolios well in advance. The immediacy of returns should not bother investors now. Our investment actions must be aligned towards a longer duration. It is the time to think ahead, invest ahead, and stay ahead. The herd does not matter for now.