Numbers and milestones clearly matter to participants at the stock-market. This becomes self-evident whenever the BSE Sensex touches a new milestone number. Some months ago, it was 70,000 points and now, it is 80,000 points. Such milestones which are ‘celebrated’ by the financial media, especially our ‘over the top’ electronic media also 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 1980’s, 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, earlier this year 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 recently touched the 60,000 points mark, reflecting a breathtaking 30,000 plus points uptick in the short span of 18 months. The onward march to 70,000 points was followed by a dizzying uptick to around 85,000 points followed by FII selling and a bizarre tariff war that brought it down to 70,000 points before a sharp rebound again took it past the 80,000 points mark.
Clearly, there is enough anecdotal evidence to suggest that there is immense merit in staying invested over really long-time frames. However, 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.
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 Sensex levels of 200,000 points at a time when we are still to get past the 100,000 points mark.
So, for all the opinions one hears and reads (including those of yours truly), one must remember, there is no single ‘correct’ strategy, at all given points in time. That is why investing is an art and not a science.
(Ashok Kumar heads LKW India. The views expressed here are his own)