The debate on whether our markets are completely coupled or can actually be decoupled with the US markets is an endless one. But, in our obsession with the global markets, we assume that anything that affects their economies will also affect us. Historically, a lot has happened in common or happened in sequence. But, this time, there is a divided jury on what would actually happen.

The whole theory on the coupling of markets is based on how flows from developed markets will affect our markets. We have seen at least one full year where global outflows simply failed to affect the domestic market sentiment. Domestic investors have unfailingly bought every dip in our market. The fall in domestic equities with global market corrections have gotten swiftly bought into.

Several market pundits, including some marquee fund managers, have gone wrong so far in predicting a capitulation of Indian equities in line with the US markets. The outflows seem to be never-ending and have still not managed to break the back of the domestic sentiment. If and when that eventually happens, the naysayers will come out all guns blazing with a thundering “ I told you so!”. But, the real story of this market is the resilience in different parts of the markets which are under-owned by global investors, the speed of ideating newer investment themes, the hunger of capital for opportunities in emerging industries, and the velocity of flows from venture capital investors into startups. Clearly, the India story seems to be growing from strength to strength even as the stock market keeps doubting its own resilience.

The coming quarters will see extended volatility in Indian stock markets. Given the global volatility, this now seems inevitable and is clearly an operating hazard to be lived with. But, while we manage volatility, we will also need to focus on how our businesses and our government are countering it. If the responses are resilient and consistent, our markets could run ahead when the global volatility recedes and equity returns as a preferred global asset class. As far as India is concerned, equity rules as the most preferred asset class for the longest phase in our history. Given our potential to grow faster, the power of reforms, and the persistence of our government in attracting global investments, we will see a very different 2023 in contrast to the present.

In the residual part of this year, we would see markets fluctuate. These fluctuations must be turned into opportunities and investors must participate actively in equity investing. It is only when great businesses are thrown away can we make the best investments in equity. Such an opportunity must not be wasted and one must always stay prepared for it.

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