Focus on the eye of the wooden bird

This lesson is of great utility to investors in India, and even more at this point of time when there is an overdose of views rather than news.
Picture for representational purpose
Picture for representational purpose

There is a wonderful story from the Mahabharata, featuring Dronacharya, the teacher,  Arjuna, the student and the eye of a wooden bird, which was the target. It offers an invaluable lesson on the importance of staying focused and keeping surrounding visuals redundant and noise out of one’s line of thought and vision. 

This lesson is of great utility to investors in India, and even more at this point of time when there is an overdose of views rather than news continuously flung at one by the real time media, most of it is of the ‘GiGo’ variety.

As one interested in behavioral studies of investors and how it impacts their investment decision-making, I have observed a particularly unique phenomenon of extreme bias in investor behaviour over the last few years. Although, the electoral results have been one-sided, the plethora of views and seemingly never ending din among those that support and oppose the ruling party has been mind-boggling.

During this period, I have witnessed otherwise savvy investors from among those that oppose the ruling dispensation miss out on good investment opportunities and returns, simply because of their belief that nothing good can happen during the tenure of this government. 

At the other end of the spectrum, even when the equity markets sailed into unjustifiable valuation levels, those that support this ruling dispensation refused to believe that a stock market correction could be on the cards, placing their bets on this government driving near abnormal rates of growth even as the global economy was grinding to a halt.

That political beliefs of both the sides clouded their reading of the market scenario may have been evident to those watching the spectacle from outside, but their hearts and minds were filled with the one-sided propaganda being fed to them by their preferred sources of information.

What is most astounding is that amidst this tunnel-vision like approach that dissects every announcement, major or minor of the government ends with a round of cheers or ridicule depending on the side of the divide the investor is on, most of them took their eyes off worrisome global events like the hardening of stands in the US-China trade war and a potentially explosive situation building up in the Gulf region which could send oil prices into a vertical ascent.

Clearly, there are multiple global factors which are as if not more potent than the domestic concerns which have ensured the markets remain volatile. When, at some point, the US-China trade war ends and hopefully a clash in the Gulf region is averted, the global equity markets could well boom. If neither happens, the descent could be rapid. 

Both scenarios are possible, though being an optimist at heart, I would hope for the former, but not without recognising the possibility of the latter and positioning my investments accordingly. Like Arjuna did, the trick lies in keeping your eye focused on the target. Laugh off the din, don’t let it cloud your investment decision making process.

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