The brain cells tick a little slowly during the Durga Pujo time and for me it certainly does tick a lot slowly than others. Blame it on the atmosphere or the passage of time. But this morning I went through a podcast that made me think. Mr. Aashish Somaiya the MD of Whiteoak Capital Asset Management Company (The Shocking Truth About SIPs Nobody Tells You | Ft. Aashish Sommaiyaa) made a very pertinent observation. We have all seen the markets rise and we have all seen the markets fall but hardly has anyone see the markets bob around the same place.
And that set me thinking. It is so true what the gentleman said. Most of us are looking at the investment status reports and still seeing the 16%-18% CAGR on their investments, of course subject to the investment horizon being 4-5 years and feeling happy. But what they do not realise is the fall in returns over the last 15 off months because though the market has not gone done, but the time period has added another year. Essentially the denominator has increased by 20%-25% but the numerator has largely remained the same. And this is a situation that we call the TIME CORRECTION.
What is “time correction”? Essentially when the indices (markets in simple terms) do nothing. It goes up by a few notches and comes down by a few notches and after all the effort manages to remain where they were.
Why does that happen?? When there is not much happening in terms of corporate action. As in the earnings growth are nothing to write home about or there is not really a buzz or there is plain and simple investor tiredness. Or there is not much money flowing in. But many people will contest and say, on the contrary there is a lot of money, just look at the number of IPOs coming. And that is another problem for the indices, I say. Because these new listings tend to take money away from the existing listed space that makes up the indices. And more importantly, there is a supply side issue. Liquidity!!! Rather the lack of it. With the Foreign Institutional Investors continually exiting markets and the desi bhais just about managing to make up the gap, the net result is a big zero. The last reason is of course, negative news flows. We have been bombarded with bad news for quite a long while now. Wars that are dragging on for ever it seems. Sanctions and threats of sanctions all around. Natural calamities. Political and social disquiet. You name it. We have seen it. And continue to. To put it in perspective, there is nothing which is adding to the feel-good factor.
So what do we do??? Nothing much needs to be done actually. Let the markets bob around for some time more. Let some positive flows come. Let some sanity prevail. And as the one single most relevant adage in wealth creation goes – Time is your best friend – follow the adage.
Best wishes for Durga Pujo. Best wishes for Navratri.
