Home / Opinion / When you want to jump on to an aircraft that’s taking off

There is something about markets on a tear that gets people’s blood buzzing. My usually quiet desk on Monday was the place to stop by and ask: so good time to invest? Waiting for the lift. In the lift. On the phone. On SMS. Good time to invest? Huh? What just happened? Monday saw Nifty breaching 7,000! And Tuesday saw it staying above that level despite bad news on the industrial production and inflation fronts. But nothing seems to deter investors who want to now suddenly swing big. Wanting to invest right away when a market hits a life-time high is like trying to jump on to an aircraft just when it is taking off or, worse, trying to leap on, like James Bond, mid-way through the flight. If investors were airline passengers, they’d find the check-in, security, boarding process too tedious and boring to go through. If they managed to do it and the flight got delayed, they’d rather go back and travel another day. They behave as if this flight will never take off. But when the plane starts to taxi and take off—gosh the mad scramble! It’s as if the average salaried people had crores that they would shovel into the market maw and see it spit out double the amount in a trice.

Coming back to the happy market, what’s it reacting to? On Monday, it was reacting to the leaked exit poll results, and on Tuesday, on the correctness of the leak. Mr Market likes political stability, it likes a decisive government and it loves growth. On the distinct possibility of getting all three, the market is singing the only song it knows. Aren’t markets unrealistic about what a Modi sarkar can achieve? Maybe. Or maybe not. Markets like stable and decisive governments because these give certainty to doing business. This builds business confidence and that is one of the key factors to kick-start the investment cycle. The current market rally looks like a blend of speculation and anticipation of the turning of the growth cycle in India. Why the euphoria? I read it more like a relief exhale. The hugely frustrating part of the last decade has been that we’ve not harvested the very low hanging fruit of growth that look so near and yet have been out of reach. For a young, aspiring nation desperately wanting the good life, the past decade has been a disaster. Frustratingly, India isn’t a US or Europe that needs excellence in technology or biosciences to generate profits for firms (not saying that we should not excel at these, of course), but needs basic goods such as roads, power, drinking water, affordable housing, cold chains, public transport, and so on. And this is not difficult to do; it’s not rocket science. All that the markets are saying is this: “We foresee a stable government that works and that will allow businesses to begin projects again". Once confidence returns, so will the investments and the profits. And where do these profits reflect? On the stock prices of listed firms. The market is not a roulette machine to double your money overnight. It is a place where profit-making firms on a growth path are rewarded by rising stock prices.

As an equity investor, don’t watch the markets, watch the underlying factors—the business sentiment and the prospects of growth. Also, understand that markets care very little about the “secular" or “pseudo-secular" or “look-at-me-I’m-secular" nature of governments. That’s an argument that the stock market wastes little time on and leaves it for the intellectuals, civil society and institutions to work out. So, does it mean this is a good time to invest? Yes. It is. But I said that when the markets were stagnant two years ago. I’m saying nothing different. Because as retail investors, we do not play the markets, we invest in them. And when we’re investing and not “playing", anytime is a good time to invest. By definition, if you are a retail equity investor, you have no business to be in for the short run. You’re looking at a holding period of at least five years, though I prefer 10-, 15- or even 20-year holding periods. Be warned of “experts" in the market—whether astrological or tarot reader or ground coffee reader or cow dung analyser or whatever—telling you what to do. A national network channel invited an astrologer to give advice to investors; he told everybody to sell. Ignore such nonsense. Do nothing that is sudden and drastic. As always, if you have investments in markets and funds, continue with what you were doing. If Nifty at 7,000 has got your attention, start systematic investment plans rather than shoveling in broken fixed deposit monies.

Monika Halan works in the area of financial literacy and financial intermediation policy and is a certified financial planner. She is editor, Mint Money, Yale World Fellow 2011 and on the board of FPSB India. She can be reached at expenseaccount@livemint.com

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