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Avoiding paranoia over stock market

Stock markets are not the perfect reflection of the economy, not always. They have their own universe, rules and barometers.

Published: 16th May 2022 06:46 AM  |   Last Updated: 16th May 2022 04:53 PM   |  A+A-

stock market; stock exchange; BSE

For representational purposes

Stock markets are not the perfect reflection of the economy, not always. They have their own universe, rules and barometers. Markets seem to either see the light at the end of the tunnel too early or gauge the coming storms too late. They have a tunnel vision—with the focus on a limited universe of listed companies—and behave accordingly. They may not always conform to our sensibilities, and can cause hope and despair in unexpected times.

Despite the second Covid wave (between March and June 2021) leaving behind death and devastation, stock markets were raging like an unbridled bull in the hope of an unabated recovery of the Indian economy. In no time, the markets had forgotten the despair of the second wave, and the Sensex had moved up 25% within six months. And now that stock markets have fallen by 13–15% in the past six months, you get to hear the noises of regret and warnings. But at least now, the markets acknowledge the risks to the Indian as well as the global economy.

To make money in the market, one may have to first accept the fact that they may go wrong in their assessments before they make course corrections, and then ride through these uncertainties, surprises and quirkiness. Retail investors can spare themselves of unpleasant surprises by being a little passive in their attitude in the markets. They need not have to be on their toes and react to every market signal, every commentary and every piece of advice. Leave that alacrity to traders and fund managers.

Not being paranoid could be the key to making money in stock markets—unless one has taken a plunge into the multiverse of futures and options trades. Of course, the economy faces uncertainties in the near future from an array of factors—local and global—and we may see a slow and painful recovery in the stock markets. But we as a country have no options but to choose the path of growth, peace and prosperity over communal politics and tensions. Markets will reap the benefits as and when it happens.



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