Random jottings of a restless mind

A potent way to survive a volatile equity market is to speak to oneself, write the ‘conversation’ and read it periodically.


This is my attempt to decode my mind’s response to equity swings and a centred understanding of how I expect to keep my head when others might be losing theirs.


The highest confidence in the markets was demonstrated when the earnings traction was the lowest (now this appears to be reversing).


There are a number of moments in a long-term bull market (this could be one) when one will wonder whether it is indeed one (as now).


In a downward spiral, the next 10 per cent directional target (30,000 when the S&P BSE Sensex is 33,000) will usually and normally be the most indicated (which seldom transpires).


The more severe the erosion, the more vigorous the probable rebound.


The two plausible approaches: Buy high-sell higher or buy low-sell high; most erosions tell us what we subscribe to.


Larger gains are generated when you buy low and attempt to sell high; quicker gains are generated with the other strategy.


The market then is more about psychology than prices: The time to buy is when even outstanding FY18 numbers are getting weakly discounted (the time to sell would be when analysts classify stocks buyable on the basis of a FY20 outlook).


The erstwhile bull rally was built on the edifice of funds flow traction more than earnings growth; the foundation of the next one could well be based around the reverse.


The origination of a bull market can be testing — there could be challenging phases when earnings grow and equities stay sluggish, with more than a lingering doubt whether the market will ever respect growth.


There is something called a ‘time’ correction and something called a ‘price’ correction. Only when the two have run their course does the next bull rally originate (which is strange because most people only talk of a price correction).


Most market responses pass through three phases – value seeking to growth seeking to froth soaking. The third phase is done; the first has begun. A further erosion cum earnings growth could position us deep in that first phase sweet spot.


The business of investing is essentially about competent doubt management: if the market knocks off 3,000 points, the doubt will be whether it will ever rebound (making it one man’s doubt against another man’s conviction).


The real opportunity will lie in picking companies at the cusp of corporate outperformance when the markets have flattened out, making their stories initially difficult to trust – but that would be some opportunity.


The market gives us two options: High equity values from where incremental gains could have been modest (at best) or a general market decline from whether the next round of growth could possibly be handsome (at worst), so why complain?


With the Indian economy gradually strengthening and equity prices eroding, could the next rebound be the mother of all bull runs?


After all the arguments about bull and bear markets have subsided, the question is to ask: would you buy into a restructured India or not?


That answers everything. The author is a stock market writer, tracking corporate earnings and investor psychology to gauge where markets are not headed

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel