It will be an understatement to say that there is chaos in the financial markets today. As the world grapples with the impact of US tariffs unleashed one country at a time, India suddenly finds itself in a pickle. You can figure that out from the trend in the currency and the stock markets. These markets pick up signals of uncertainty quickly. They loathe it, and any threat to future profits is viewed negatively. Those in the currency markets foresee India’s exports getting disrupted, and those in the stock market look at the negative impact on future corporate profits. India’s Nifty has witnessed a sharp selloff over the past week while other major global indices have held firm or rallied. There are specific concerns investors have about India due to President Donald Trump’s unilateral action of additional tariffs on the purchase of Russian crude oil.
Despite all of that, the big picture in India is not so worrying. India’s government finances are strong, with no risks to the government revenue. The economic growth is expected to be well over 6%, according to most pundits. The Reserve Bank of India’s monetary policy committee has put out a benign outlook for the consumer price inflation. That indicates little or no risk of inflation ahead and a downward trend in interest rates.
You may want to read these trends and move forward cautiously when it comes to money. There is a risk to your investments. However, there are ways to work your way. You can take a leaf out of the ancient Greek philosophy or Stoicism. The concept evolved in the third century BC. The concept of ‘control your controllables’ means that your habits with money are far more critical than the external turmoil around you. A disciplined approach to investing is better than trying to time the market in turbulent times. A market fall in such a state of uncertainty could be like catching falling knives.
Yet, you may want to accept volatility as a part of your life. Instead of complaining about it, you should accept that there will be times regularly in your financial life when things will not go in your favour.
When there is uncertainty all around you, it is essential to stick to fundamentals and knowledge. Over the past week, as share prices fell across the board, shares of the National Securities Depository Limited (NSDL), the nation’s first depository, started trading on the Bombay Stock Exchange. They closed at over Rs 1,300 per share against the IPO price of Rs 800. That is a significant jump when you think about the turmoil witnessed in financial markets.
The company is a profitable business with little or no primary capital requirement. The listing of the shares was due to the need for existing shareholders like the National Stock Exchange, IDBI Bank or the government to exit. The company makes steady revenue and profit. Despite all the hype around investor education, only 8% to 9% people have a demat account. Going forward, the two depositories, NSDL and Central Depository Services Ltd (CDSL), will continue to garner new account holders. The depository business may only need capital for any future technology expansion. Otherwise, with the help of early shareholders’ money, these companies have already created a growth engine. That possibly explains the successful listing. Shareholders can see growth in future revenue and profits despite all the chaos in the external environment.
Many pundits advocate for a ‘bottom-up’ approach to investing when share prices continue to rally relentlessly or there is turmoil. Aligning your expectations with the future growth is a good way of investing. That is because share prices always follow future profits. It is your knowledge and understanding of this alignment that protects you.