Update #04
Good Evening: thanks.
Today Indian indices fell by nearly 3.5% but what caused the fall?
Market doesn’t like uncertainty. Today indices fell with the current news of increasing Covid-19 cases and possibility of an impending lockdown. However, I personally don’t feel that going further market will fall dramatically based upon past experiences.
Here are some reasons why we think markets are not likely to go down further;
1. Markets normally don’t fall twice for same reasons.
2. Indian companies are now well aware of the effect and side-effect of lockdown. All are using new SOPs and taking necessary safety precautions. Plus there is vaccine that reduces fatality. So like scientists say, COVID will become part of life just like the other known viruses.
3. Government is also trying its best to break the chain as well as vaccinate the population.
4. So, at worst we might go down between 5-7% more. At best, this would become an interesting investment opportunity and we could soon turn around from this point.
Note:
1. Markets may fall sharply if there are some news of war or similar. Such geopolitical events cannot be ruled out.
2. Up to 10% fall in the market is a normal ongoing volatility and requires no serious action.
3. -10% to -20% is a market correction and a good buying opportunity which we will take advantage of. If you have surpluses it would be a good idea to deploy now.
4. Down between 20-30% is a bear market phase.
5. If markets go below 30%, it’s a crash and that will be a recession phase
Update #03
History starting to repeat itself…
Worldwide we are all in a lockdown and one of the best things we could do is to relax and rejuvenate ourselves for the years to come. Let’s learn something new, try something different, spend time with family and enrich ourselves.
March 2020 was quite a difficult month… In about 10 days the stock market fell dramatically. About 20% +/- falls are normal and do not warrant much action. Falls of about 35-40% +/- are crashes & they are rapid. Then there is always a pull-back rally and you are witnessing that right now; last three days and up 12%. Such drastic falls and recovery have happened all along the last 30 years of our markets. Earlier yesterday I was reviewing the last 100 years of American stock market history. The situation was the same. Most times the recovery period is between 12-24 months & things come back to normal. The important thing is to stay invested so that you can reap profits of the entire recovery.
Meanwhile try to keep calm, listen to some music, hold your nerves and relax. Once again remind ourselves that money invested into equities was for creating long term wealth. So short term fluctuations of a few months should not make us doubt our long term strategy. Money meant for short term goals is anyways into debt oriented instruments.
An interesting learning for many of us which makes maximum sense right now; If the holding period of our portfolio has been long enough (10 years+) you notice that it is still positive & with profits. Just that part of these profits have depleted. This is the beauty of equity. Add more and be prepared to see magic. That’s the holy grail.
All said at this time we are indeed waiting for a medical solution. We hope that we will hear positive news soon. The exact time of this is hard to predict; but then humanity has not only endured difficult times but also survived and emerged even stronger. That fact is unshakable.
Update #02
The march downward continues…
This March of 2020 continues to be filled with anxiety and stress. The stock market has been continuously marching downwards. This is not the first time we’re seeing something like this. In the history of the last 30 years of our stock market we have seen such movements. After the dust settled, we have also seen periods of fabulous returns.
But this kind of the period is not easy to live through. The important thing to understand is that everything is normally exaggerated. When the markets are moving up, we hear unrealistic numbers. Same happens when the markets move down. Meanwhile it is not easy to sell off and hope that the market goes down even further. It could turn around any time. I think we’re almost done with the correction based on the historical average of the last 30 years. Also note that we are in an extraordinary situation.
What should we do? Focus on work, on family, on life… and stay buckled up to ride the next rally. When the scenario changes for the better, we will also see solid movement upwards. This normally happens within 6 to 18 months. So by the end of 2021, our portfolios will be not only back to normal but would also have more profits. Keep your faith in the ability of Indian businesses.
We have a long way to go; the younger population of India today is the largest in the world and this population has got to do a lot of things. They have to buy homes, vehicles and luxury goods. They have got to also travel and indulge in great experiences. They are intelligent and they are going to have a lot of disposable income. It would be wise then to be owners of shares of the companies that are going to benefit as the large population of this country lives their life journey. I think we will see a great bull market for the next 10 years till 2030.
What would also be nice and clever to do is to start investing if you’ve been waiting. If you have surplus funds at this time and if you did well to invest them, then you are going to be very lucky. At our end we are continuously buying and making large movements as the stock market keeps correcting. We do not know where the bottom is; the probability of going down further is about 20% in my view. 80% percent chances that we will move flat and slowly turn upwards. Meanwhile we maintain our strategy of being approximately 40% in large-caps & blue chips, about 40% in mid & small caps and about 20 in promising sectors.
We keep the faith and continue holding, continue buying and we urge you to do the same.
Update #1
Fall in markets_March 2020
Greetings everyone:
I know that you might be a bit concerned over the fall in our stock markets & markets around the world.
We had a hard time last week & this week has been no different. Markets are falling and when markets fall… people think that they will keep falling. The fact is no one knows how much it will fall and from which point it will turn around. We are in a grossly oversold zone; so technically the movement should be upwards or sideways.
Sentiments are quite timid at the moment and there is way too much nervousness. Slightest of reason and markets fall. Anyways a 10% – 20% fall in equities is to be expected at any time. That is one of the fundamental rules of equity investing. Another ruler is, sharper the fall… sharper is the recovery. So for the time being we may suffer a bit if you are fully invested. Another important rule is don’t get scared, don’t panic and don’t sell. The stand-off scenario keeps repeating itself every few years. Resilience always waits and wins.
Our current strategy: For existing investments, we may be restructuring to move higher allocation to areas likely to gain immediately from recovery & in 3/6 months post recovery. SIPs continue as usual. For existing debt investments we are moving money into Index funds & equity funds in big chunks. For existing ULIP debt investments we are again moving to multicap equity funds in big chunks. For direct stock investments the liquid money is being deployed into equity markets swiftly. New investments are directly hitting the equity markets. Yes, we are following best principles of investment. Being greedy when others are scared. Investing when markets are down. Holding onto good investments as it is as we do not know at which point there would be a sharp positive turnaround.
Meanwhile, pretty much everything that you are hearing about is correct, be it Coronavirus or Yes bank or GDP falling behind etc. Markets, countries and economies are always in transient state. Follow prudent principles and it always works out as expected.
Kartik Jhaveri
Director – Wealth Management
Contact: 022 – 40024043 / 44 / 45… What’s app on + 91 7977877924