Pessimism Galore!

What a day it was. Nifty is down to 15300 and everything came down crashing alongside. Beyond a point, I couldn’t even look at the screen to check my portfolio because it didn’t seem real at all. Twitter is flooded with doomsday predictors and everyone and his aunt is advising you to sell everything and run away.

Let’s see some facts. This is the first close to 20% drop post Covid crash of 2020. However, this correction has now entered its ninth month and is slowly wearing everyone down and out. What is being felt is the idea that this is just the beginning of a long drawn bear market and we’re slowly heading towards much lower levels on the indices. Well, let’s go back a year back and recall how things looked back then.

India was reeling under an extreme Covid induced emergency and we had hardly vaccinated a million people. The world and left cabal predicted the end of the road for us as a nation. The tax collection was severely hampered and we didn’t even know if we could ever come out of a lockdown. On the day the second lockdown was announced, the market made its then bottom of around 13000 and flew all the way up to 18600 in six months time.

Cut to today. Our monthly GST collection is over 1.4l crore, direct tax collection has crossed estimates, exports have touched $400 B and are on their way for another record breaking year this time around. Add to this that the FII have sold close to 4l crore( over $50B) since October 2021 and are relentless in their pursuit. On the net basis, they have now sold more than what they invested since the end of Global Financial Crisis, way back in 2010.

The Indian market is slowly being supported by its own money- money you and me are investing, betting on India. Retail money through SIP crossed 12000 crores a month in May 2022, which is almost twice what it used to be hardly 4-5 years ago. If it was not for our retailers, Nifty would have been sub 10000 by now. Remember, on account of a much subdued level of selling, our markets fell 60% in the 2008-09 crisis.

As far as the US markets are concerned, nobody knows where they’re heading. If it is really the doomsday everyone knew would come one day since 2009 or not, I don’t know. One thing though, is very clear. This whole shebang of Startups changing the world has landed in the gutter and is being flushed pretty hard. The only reason we don’t know the real extent of pain is because private equity prices aren’t quoted daily. Just see what has happened to Cathie Wood’s ARK innovation ETF or our very own Paytm and the likes.

How am I faring? Well, being down 20% doesn’t feel nice. However, to be down just 20% in a market like this is a blessing! We didn’t even realise when Hindalco fell 50% from its peak or how Bajaj Twins are both down 40% or how HDFC group lost its sheen that when I realise I’m still only down 20%, I somehow thank my stars.

What am I feeling? Well, I’ve single point belief in the idea that India’s market is in a multi year bull run and this is just one of those Bull market corrections I had read in history books. I unflinchingly believe in the idea that in ten years time, India would be much richer than today and some of the stocks which I own today will not be up 2-3x but will possibly go up 20-30-100x from here. Everyday when I look at the prices, especially when nobody has any money left to invest, I realise the prices are in some cases unreal. The selling is irrational, not as much as we saw during Covid but pretty close. This is definitely more intense than 2018 though.

What am I thinking? As a keen student of behavioral investing, I sense pessimism getting towards borderline depression. Everyone is predicting doomsday. Everyone and his aunt knows that inflation will kill our savings and how recession will kick us in the butt. Everyone knows the market is headed south. People have literally stopped me to ask how low we are going. This is music to my ears as I sense we’re pretty close to the bottom. In April 2020, I distinctly remember I told my friend that we had hit a bottom because everyone was talking of an impending crash in June that year.

I was today telling my wife that the fastest way on the upside is by short covering. The markets are getting severely oversold. One small trigger and there can be massive short covering. What today looks like down 20% can in a matter of a few days become down 5% or even better. Remember that nifty went from 7500 to 10000( a move of 33%) in hardly two months time. So to go back from 15200 to 17000 is just a matter of a week.

I do realise that to say such things when everyone is losing their shirt is not easy. Well, who says investing is for the faint at heart. It takes courage to lose a couple of lakhs a day and still smile. Imagine how much down RJ would be on a day like today. Even a down 2% day is over 800 crores for him.

So my dear friends, I am extremely bullish on India, always was and forever will be. This is the time to buy, as much as you can. If not, this is the time to hold on to your stocks tightly.

One of my favourite lines is what Jack Bogle said” Your success in investing will depend in part on your character and guts, and in part on your ability to realise at the height of ebullience and the depth of Despair alike that This Too Shall Pass”