What a week it was! Everything just went down and out and then some more. Mid and small cap index lost close to 10% in a week isn’t a joke. Everybody who manages public money is running over each other to come on TV and say that they were the ones who spotted froth in the mid and small caps and that they were smart enough to allocate to only large caps.
There is a line to claim who went to cash the earliest and how they’re the smartest fund manager and anyone who was still invested is a novice; someone who hasn’t seen a market cycle and how only someone who is touting asset allocation and has been here for 30 years is the true guru and so on and so forth.
The amount of pessimism is unbelievable. Ive been in the market for close to 7 plus years and except Covid, I don’t recollect any time when the pessimism was so stark. The difference is that there isn’t an obvious reason to attribute for the fall and the relentless selling by FII and now even by HNIs is strangely without a visible backing. In 2022, it was Russia-Ukraine, or the rise in yields in the US; in 2018, it was the LTCG or the loss of some election by the BJP. Here, there is none.
Everybody is unanimous in believing that the market can and will go down but everyone is still looking for a way to intellectualise this opinion. I mean, if India was expensive, then it is less expensive now; if our growth was slowing down, RBI has infused a lot of liquidity and cut rates and also the CPI number was lower than expectations; if the earnings were terrible for September quarter, they are less bad in December and so on and so forth.
So the point is that there is no one reason on which everyone can unanimously agree to blame for the crackdown in portfolios.
What am I seeing here!
I was and until am a believer in psychology of the markets. I claim no special insights into prediction the tops or the bottoms but I believe in cycles of the markets. I also am a strong believer in the inherent growth of India and still believe that the bull run which started during the depths of Covid in March 2020 has a lot of legs to run. That market saw us go from 7500 to 18000 Nifty in October 2021 to a drop of close to 15% to around 15k and from there to 26k nifty in September 2024 to now around 23k nifty. A mere 3x in 5 years isn’t a mega bull run, especially if you take it on a five year just before Covid low basis, index has only gone from 12k in February 2020 to only a double now.
I was getting a lot nervous in late December when my stocks were going up pretty rapidly and was wondering whether a top was being made. The top, however, is not even close.
Friends, tops are made when everyone is bullish and has made a lot of money; when you are not thinking of nifty going to 20k but betting your house on it going to 50k; when the worst stock of your portfolio is up 20% in a week and you’ve made 5-10x on stocks you don’t know much about. Its counterintuitive but the top is made when there is no seller left in the market and everyone simply want to buy. That’s when the final hurrah is made and the stocks can’t go up anymore.
Similarly, the bottom is made when there is no buyer and everyone only wants to sell and run away.
This is what I am seeing right now. We have gone down sufficiently for any or all froth to vanish and one thing which all of us can agree is that there is no pockets in the market where there is any kind of froth is left- F&O trading frenzy has died; PSU- defence and railways are mostly down 35-65%; so are EMS, PLI type or even capital market stocks. TaMo is down 45% and RIL, HDFC Bank and Nestle have given zero returns for 3 years. So what else do you want now!
As the next week unfolds, we might see further downside or markets can go up, who knows. What I know for certain is that when there is blood on the street, you go out and buy and baby there’s an absolute carnage on the street. Everyone is certain that all rallies will be sold into and whenever there is a bounce, the markets will fall down to even lower levels and all starts on the upside are false. Only until when they aren’t and then the rally which will start will be so ferocious that people won’t even believe that their portfolios have doubled in no time. I was extremely scared till today first half but the way the bloodbath continued, it made me remember the days of April 2020 when I went all in while the smart people still predicted nifty at 6000 in June 2020. Well, it never happened.
I don’t know if the markets will stop going down. All I know is that if it does, you’ve to turn even more bullish and if market falls another 10%, start putting every penny you have in stocks. This is a clarion call to buy, buy and buy. Your friends and neighbours are now running around to buy gold; it’s time to buy stocks like there’s no tomorrow.
The next phase of this bull market will take us to places we can’t even imagine. The amount of wealth which will be made will make the believers rich beyond belief and I am sure we will look back at February 2025 as the time to buy when we got scared and sold out.
Disclaimer- The views expressed in this blog are personal opinions and are shared for educational and informational purposes only. They should not be considered as financial, investment, or legal advice. I write primarily to document my own learning and thinking process. I am not a SEBI-registered investment adviser, research analyst, or financial influencer, and no part of this blog should be seen as a recommendation to buy, sell, or hold any security. Please do your own research or consult a qualified professional before making any financial decisions.
Life is all about Compounding! 