On a recent podcast, I touched upon the broad Macros and Micros of the Market as well as the Art of Biding Time in the market. Am sharing some of the key points that I made in this column.
On the Macro front, conflicts remain on the boil in different parts of the world be it between Russia and Ukraine, Iran and Israel, India and Pakistan besides China and Taiwan. Adding to the resultant uncertainty is the even bigger uncertainty around how sacrosanct trade deals made with the USA are anymore. The recent US Supreme Court verdict that upturns the earlier tariffs has led to countries pausing deal closures.
While the Indo-US deal is thus too early to call, the Indo-EU deal is a definite positive for the Indian economy and in a way, lessens the overhang that has existed over the Indian equity market ever since the tariff circus commenced.
Artificial Intelligence (AI) is the joker in the pack. While everyone seems to agree that it would be a game changer, few are able to quantify its impact and the sectors that it will hit hardest as well as the ones likelier to be less impacted. It thus merits close monitoring and studying before initiating any portfolio changes based on it.
On the micros front, the time correction has now run for almost 18 months and the relative valuation of the broad market, though still not in an undervalued zone, is better than what it was 12-15 months ago. It is thus that every round of profit booking is followed by a wave of buying and in this context, one must appreciate the role of Hybrid Funds in which money currently parked in Debt and other Assets Classes can be deployed into Equity. This is providing an unseen Safety Net to equity investors.
Then, the fact that the Indian indices, though stalled, have not gone into a free fall inspite of the multiple conflicts mentioned earlier and particularly the Indo-Pak 4 day war triggered by a terrorist attack suggests that at declines, the Indian markets turn more attractive and that leads to buying spurts which send the indices back to where they fell from. This scenario has played out several times over and unless there is some catastrophic event that takes place, chances are that the breakout might eventually be on the upside.
Finally, one must appreciate that Equity is a non-linear asset and not for those who fear negative returns. Downswings are inevitable as part of every cycle and one must live through it to eventually reap rewards. One can of course consider hedging with Gold while the more adventurous with higher risk appetite can even speculate with Silver.
As I have mentioned before, biding Time is a tested Strategy I’ve adopted over three and a half decadesand it has inevitably worked. My strategy is no different this time too. Of course, there is no one approach or style that suits all investors and one would do well to seek professional advise to identify and adopt the strategy best suited to them.
(Ashok Kumar heads LKW India. The views expressed here are his own)