Scams, crony capitalist exposures across the political spectrum, lack of faith in politicians, nameless companies holding hundreds of crores of investments, land becoming the preferred instrument for personal aggrandizement by politicians – the mood of the nation can’t get any worse when fingers start pointing right at the top to indicate where the rot originates. But, the important thing to remember is the rot at the top has only one remedy and that is to overhaul the top. This process of political overhaul would hardly be easy when the collusion at the top is firmly set across the political spectrum. In such a situation, everybody should be exposed to make their positions politically untenable. This is precisely what is happening at the moment and churn will only increase as the exposes continue. This is positive if we look at the long term interest of the nation. So, what should investors do when the mood is so glum? Investors must view things in perspective. The economy will definitely see better times and it is the public confidence that needs to return over time. Rebuilding public confidence will happen electorally and investors must use the market volatility to show faith in the future of the nation. After all, the faithful’s have always been the winners.
If you are investing based on your dreams, you will probably wake up too late to reality.
No asset price is infallible. Deep down, we know this truth. Yet, the human minds find ways to think that ‘this time it is different’. Bubbles have some unmistakable symptoms. Ironically, it is precisely these symptoms that make us to think that things will be different. The realty markets are seeing unparalleled exuberance. Full size front page ads in newspapers, big fat property supplements, omnipresent TV commercials, party conversations inevitably centered on realty and rock star status to realtors and land bank owners are some obvious signals around us. That brings us back to a basic question. Is there a bubble in realty? We can already hear the loud noise as you read these lines. But, conviction should stand even in a minority of one. We believe that we are in the middle of the biggest property bubble in India’s history. Bubbles don’t tell you when they are around. You need to read them right. Playing safe should mean staying out of a bubble. Sadly, many investors in realty are mixing up playing along with playing safe. Playing along in a bubble will inevitably invite pain.
Buy only compelling equity ideas. Focus on gilts.