As i write this, on the evening of May 20, the third of the three most eventful days in the Indian stock markets has drawn to an end. As is probably common knowledge now, the Sensex witnessed its greatest ever climb on Monday, the first trading day after the 2009 Lok Sabha Election results were announced. The unprecedented 2,100 points upsurge has in all probability caught the attention of even those who have absolutely nothing to do with the Indian stock markets – a miniscule minority, I am sure. The newspaper and news channels headlines have been screaming out about the market’s post-election gains with immense vigour after all. And just like the previous year’s crash and the bull run of the past few weeks, the post-election surge has come as a surprise as well.
In the past few weeks, I have come across a number of people – investment experts, fund managers, advisers as well as investors – who have been waiting for a post-election dip in the markets. The general consensus has been that what happened after the 2004 elections would happen again. Everyone who was waiting for the dip to provide an investment opportunity has been caught on the wrong foot. On the other hand, people who were holding onto their investments have profited magnificently. On Tuesday, equity mutual funds registered an average profit of around 15%. A major part of the losses of the previous year have been wiped out and after just two days, we are starting to hear about the 18,000 and 20,000 levels once again, even though the markets ended Wednesday in the red. So, is this rally the beginning of another bull run? Will the magical 20k level be breached again? Well, not in the near future.
One of the first things that investors need to keep in mind is that the global recession is still very much on. The markets, like always, have been affected by external factors. This time, the effect has been positive, but it won’t take much for the markets to be affected negatively either. In the coming times, the markets will probably be as volatile as they have been of late. There will be instances of upsurges, but just as many of dips as well. And trying to figure out when the dips or surges will come might turn out to be an investor’s biggest folly.
The period of the last 17 to 18 months has been the greatest lesson in investing. We have learned that the markets have a mind of their own. One can never predict how they will behave or react to a situation. And invariably, the markets perform the way they are not expected to perform. For an individual fund investor, good times or bad times shouldn’t matter. The only thing that matters is figuring out a way of investing that is independent of downward surprises like the global financial crash as well as upward surprises like these elections. In the short-term, the world is largely unpredictable and trying to invest by predicting it will hardly ever achieve anything.
Going forward, adopting investing principles is the only logical way for investors. After all, long-running SIPs are what have benefited the most from the post-election surge. Invest steadily and regularly is a mantra that will never die. The markets may have successes and failures, but they should be looked at only from a distance.
?The author is CEO, Value Research
