The times is a changing! In less than 18 months, markets have gone from lifetime highs to multi year lows and back to lifetime highs. Investor sentiment has also seen a rollercoaster ride from euphoric in January 2020 to despondency in March-April 2020 to back to square one today. One question which puzzles most of us today is that Markets have moved up a lot. Is it a good time to invest? I mean, it’s trading at lifetime highs, how high can it go?
If you believed that the markets can’t go up further after making fresh life highs and a correction is imminent, you’re likely to have missed most of the bull markets in the history of this world. Dow made a fresh record high in 1981 after 16 years and didn’t stop until the next 19 years when it topped out at almost 11000plus! Our Sensex topped out at 4500 after the Harshad Mehta bull run in 1990s and crossed this level only in early 2000s, and went on to hit 20000 by end of 2007. So are you sure it can’t go up any further?
I have another point to make. That the market is trading at lifetime highs is only reflective of what has happened in the past. However, this is not the highest this market will trade in my lifetime. You’ll see multiple higher highs over the next thirty years and looking back, not buying when Nifty was 16000 thinking the market is expensive will look like a joke, a very costly one rather.
We’re all making investments for the future. If I’m buying Reliance at 2200, I’m not buying it because it has done everything it could and will be liquidated soon, but because I believe there is a fair chance it’ll generate higher profits over the next five ten years and its share price will go up significantly from what it’s trading at today. Just because people on TV are shouting markets should fall now doesn’t make it a case for it to happen.
There are two reasons I believe why you should remain fully invested at this point. One, after 17-18 years, Indian markets and economy have bottomed out simultaneously in 2020. This looks like beginning of a long capex- cycle when our corporates will expand, with higher profits leading to higher stock prices and higher GDP leading to expansion of the pie. A bigger GDP will lead to further consumption and investments and thus, will lead to a virtuous cycle for atleast a few years.
Behaviourally speaking, people are still sceptic about this bull market, leading me to believe that there is no over heating, yet. Hence, a big crash isn’t imminent
If this is indeed the mother of all bull markets in India, and you sell out early waiting for a correction which doesn’t happen for the next three years, you’re likely to either hold out on cash for far too long or will reenter at much higher levels, losing out on the intermittent gains. The worst thing you can do in a bull market is to sell early and miss on the big gains. Sensex went up 5x in 4 years in 2003-07. If you were smart enough to sell out after the first double, you’d have seen the market double from there and lost all the gains which were yours to take.
Second, we are all in our twenties or early thirties. We have been in the market for under five years and still have good 20-25 years to go in our careers. As India grows, some of the companies now making 1000 crores in a year will make 5000 crores in a quarter and their share prices will go up 100-200x in our lifetimes. ICICI Securities has made 1000 crores profits last year( it’s highest ever) while Charles Schwab, a global giant broker in USA made over 10000 crores in a quarter! Imagine the kind of money these companies will make, if they survive all the way. ITC cigarette profits are close to 10000 crores annually while Philip Morris made 60000crores last year. The entire market will grow multiple times in the next ten twenty years, and thus will rise the stock prices.
I firmly believe that if you can ideate how India will be in 2025-2030 and beyond and which companies will be alive and growing then, buy them today as much as you can and sit tight on them. Don’t look at the price for next three years( easier said than done), so atleast make a commitment to not sell till end of 2025. Even if half of what I write here turns out to be true, you’d be rich beyond your wildest dreams. This is not your lifetime high, only for the guy who’s quitting today. Invest big on India, it always works!
Life is all about Compounding! 