The Winner Takes It All

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Participation in equity markets is viewed as a secular trend. Being invested is not the same thing as being invested in the right place. Even within the equity market, where you are invested matters. For instance, one could still have been fully invested in equity markets without owning a single tech stock in 2000 and a single infra stock in 2008. Keeping a reduced ownership of financials and midcaps and yet being fully invested in 2017- 2018 may well be the contemporary equivalent of that behaviour. Outcomes could have been dramatically different for the consistent contrarian.

Domestic money has been a serious determinant of every bull run of recent times. This bull run is predicated upon how aggressive domestic flows are directed and where they are headed. The end of this bull run also arises from this direction, actually from its reversal. So what actually happens? After long periods of continuous inflows into a particular segment of the market, we started seeing the flows go the other way. The catalyst could be from anywhere. And once the reversal happens, more people will get caught by buying the dips.

Strangely, in both 2000 and 2008, there was ample scope to be a determined contrarian and succeed at it. The answer lies in relying on top down investing when the bottom up trade goes over the top. This is easier said than done. The current phase is also looking to become a top down dominant trade again. The sad thing is that nobody seems ready and willing to bet on it. The winner will clearly take it all.