The BSE Sensex crossed the 70,000 points mark recently. Such milestones are ‘celebrated’ by the financial media, especially our ‘over the top’ electronic media, and it invariably sparks a debate on whether a huge correction or even a crash is round the corner.
If I look back at the journey of the BSE Sensex since the late 1980s, it stood at 510 points in January 1987 and then soared to a new high of 4285 points by January 1992 before dropping to 1991 points within a year in January 1993.
The BSE Sensex then soared once again to 5887 points at the turn of the century in January 2000 before literally halving to 2924 points in January 2003. From a point where all seemed lost, we witnessed a huge secular bull run over the next five years that took the index to 20,873 points in January 2008.
The index once again slipped sharply to 8674 points within a year in January 2009 before making a fresh outbreak in late 2013 to end up at another new high of 28,233 points in January 2016. At the turn of the decade in January 2020, the BSE Sensex was once again riding a new high at 42,273 points before the Covid pandemic brought it down to its knees at 25,638 points in March 2020. In just 18 months thereafter, the same index touched the 60,000 points mark, reflecting a breathtaking 30,000 plus points uptick in the short span of 18 months. Almost inevitably, it paused for a fair while traversing to and fro between 55,000 and 60,000 points before a recent take-off took it past the 70,000 points mark.
Clearly, there is enough anecdotal evidence to suggest that there is immense merit in staying invested over really long time frames. However, since investing is an art and not a science, there is no single ‘correct’ strategy that can be deployed at all given points in time and even more so, to approach a raging bull market and fears of a deep correction or crash.
A lot depends on the life-cycle stage of the investor and their near-term goals and objectives. While staying put may be the optimal strategy for those with a longer-term horizon for their investment goals and objectives, the same may not be true for someone with nearer-term investment goals and objectives. Such a person, and more so, if the goal set has been achieved or nearly achieved should actually be thinking of booking at least partial profits to divert the requisite money off the table.
Similarly, one must also have the discipline to shut out loud external ‘noises’, in this case, those who are perpetual doomsday predictors as well as those with irrational exuberance talking of the Sensex being poised for a one-way take-off sans any hiccups en route.
So, for all the opinions one reads (including those of yours truly), one must remember and I re-iterate -- investing is an art and not a science. Hence, there is no ‘single correct’ strategy, at any given point in time. To each, her or his own.
Ashok Kumar
Head of LKW-India.
He can be reached at ceolotus@hotmail.com (Views expressed here are personal)