The Winner Takes It All

The worst of the times for an economy is when confidence runs lowest, people have lost faith in their government, the currency begins to wobble and the stock markets tank. But, these are not really the worst of times for investing in equity. In the current era of mini black swans, fast changing allocation of global capital to nations and speedy governmental response to crisis, nothing lasts for too long. So a crisis has a time value and sentiment could change so swiftly that a year down the road, you would not be able to find even a mention of those tough times. Opinions are so short lived that judgements based on them could fail. Investing should rise above opinions and focus on fundamentals. Foreign investors had allocated more capital to India last year. Domestic investors went overboard on the back of FII sentiment. Now, this was a dumb thing to do. You don’t make your investment premise based on what others are doing. Today, FII’s find that they are sitting pretty on profits in India and other markets look more attractive. Naturally, they tend to shift some monies around. The speed with which they do it tends to create market turbulence. While FII’s take money out of India, domestic investors seem to be panicking. This is doubly dumb. Sensible investing should squarely deal with buyers anxiety and sellers panic. Indian investors haven’t learnt either. The current market crisis is one more opportunity to think and act independent of the FII’s. Playing contrarian to FII’s is the only way to earn significant returns in India. That is one home truth everybody needs to learn from this crisis. It is time we backed ourselves up without worrying about what FII’s would want to do. That is the only way big monies can be made in equity.

In the short run, the market is a voting machine, but in the long run it is a weighing machine.- Ben Graham


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