Warren Buffet made this profound statement many years ago, “A prediction about the direction of the stock market, tells you nothing about the where stocks are headed, but a whole lot about the person doing the predicting.”
Howard marks, one of my favourite authors wrote a wonderful memo on, Uncertainty associated with investing and the difficulty in trying to forecast the future in My 2020. (https://www.oaktreecapital.com/docs/default-source/memos/uncertainty.pdf)
John Kenneth Galbraith ended the argument by saying, “We have two classes of Forecasters, those who don’t know, and those who don’t know that they don’t know.” Let me add my two bits by saying that ‘only two people can predict the market in the short run, one is a liar and the second is God.’
The Jan 1st week mailbox is invariably full of the market predictions by all and sundry and most forecasts are invariably wrong, but market predictions are fun, they are entertaining, and they are educational. They make us think of all the variables and how they may behave in the coming 12 months. There has never been a year where the battle between the Bulls and Bears is not keenly contested and feverishly discussed even before it is played out. Hence it is fun, so let’s have some fun.
Please don’t make any portfolio additions, redemptions or changes based on my words ahead, as it does not constitute investment advice. I am not going to act on it and nor should you.
Investing is never about returns but about achieving goals, about achieving returns which can beat inflation post taxes. Investment decisions to achieve the goals should depend upon your current situation, time horizon, risk appetite, risk capacity and ability to withstand volatility which is the nature of the beast called the Stock Market, and not on short term predictions and changes thereof. Luck plays a major role in your returns, and please don’t mistake it for skill and end up making foolhardy investment decisions.
I recently read a wonderful blog titled ‘What if the Bull Market Keeps Going? ’posted on January 3, 2022, by Michael Batnick. (https://theirrelevantinvestor.com/2022/01/03/what-if-the-bull-market-keeps-going/ )
Great insights indeed and that set my mind thinking. Are we in for a Multi-Year Bull run in India and if so, how will investors react to it? Will they encash too early as even the seasoned investors at most times, or will they be able to ride the boom over the cycle and harvest their gains only when they need the funds. Our role as financial intermediaries then, becomes more critical in managing the investor rather than manging the investments alone. Our role needs to be more focussed on manging investor behaviour and helping her overcome her greed and fear than suggesting the best investment options alone.
As far as the current year is concerned, we have presented below the Bull case versus the Bear case and the likely variables which will affect the market. The biggest positive for the market will definitely be an earnings uptick and we seem to be on course for that, if not for the entire corporate sector, definitely for the index companies, what with the formalisation of the economy and resultant increase in market share for the organised sector and the reduction in costs due to lower overheads and benign interest rates. (Its never as simple as that though)
Short term factors will invariably lead to intermittent corrections which may test 50000 levels or below during the year, as is the norm in any bull run. However, the biggest negative according to us is going to be a Black Swan event, something which we are unable to anticipate. All other possible negatives seem to be factored in more or less and having said so, the market always likes to surprise us either way and can be highly irrational and illogical in the short run.
So be prepared for a great buying opportunity, or just jump in at today’s level and ride the train or be patient and while away your time till the paint dries and miss the opportunity to ride the gravy train.
Most commentators talk about the greatest Bull run ever for the Indian Stock Market over the next 7-10 years as we are on the cusp of a “Chronological lottery.” As we traverse our way to a GDP of $5 Trillion and onwards to $ 10 Trillion, tremendous wealth is going to be created. Whether that happens by 2025 or 2030 or beyond, we don’t know, but we don’t see a better investment alternative over the next 10 years or so.
The economy is firing on all cylinders, Investment boom is being forecast both for the private sector and the public sector. Exports are booming and YTD December we have achieved a merchandise export of $300 Billion and services export of $160 Billion and India is on track to touch total exports in excess of $650 Billion this fiscal and possibly surpassing $1 Trillion by Fiscal 2025.
PLI, Scale up, Decarbonisation, Green energy, Infra spending on highways, rail, smart cities, transition to gas, capacity addition and many more such factors will lead to a multiyear capex cycle and upcycle across sectors.
Digitisation, financialisation, favourable demographics, increased participation of women in labour force, hybrid work models, Increase in per capita income from subsistence level to levels where increased discretionary spending will be possible will all lead to a boom in consumption over time and a virtuous economic cycle of growth.
Business models are changing and the speed is amazing. Five years ago, the biggest concern used to be, How will India fund its growth, will it fall into a debt trap? And today the Universe has conspired to give us excess world liquidity, low interest rates and PE/VC funding which alone is providing risk capital for a start-up boom which is expected lead to the start Up Market cap of $ 500 Billion by 2025 or earlier.
Superior earnings growth should lead to a rerating at some stage. The major increase in number of first time investors, ease of investing through digitisation will lead to structural changes in market ownership and dynamics, as already visible in huge SIP inflows and relative immunity to FPI inflows.
Global Debt levels, Stagflation, Geo political tensions, an ageing world population and Black swans may be the game spoilers and may impact market for extended periods but if the Central Banks continue to support markets by pumping liquidity, who knows what may result.
Going ahead, disruptions are going to be the norm. Blockchain, metaverse, green energy, IOT, AI, Web 3.0, Quantum Computing, smarter algos and machine languages, EVs, are going to impact us sooner than later and in ways we don’t even imagine. E commerce to Social Commerce to Q Commerce happened before we could blink.
Five years from now, the constituents of the index are going to be vastly different to what we are familiar with. Satraps and behemoths of today may vanish like the dinosaurs. The only solution is to be nimble and leave it to professionals and enjoy the journey.
Here is to fun and to exciting times ahead.
Wishing you a Happy New Year , full of pleasant surprises, New hopes and New opportunities.
Wish you Enough….
Kindly check our earlier blog on a similar subject : Investment Lessons from Mythology at https://sahayakgurukul.blogspot.com/2019/03/investment-lessons-from-mythology.html OR https://www.sahayakassociates.in/resources/our-blog/2553-sahayak-associates/sahayak-associates-blog/8435-investment-lessons-from-mythology
Note: All information provided in this blog is for educational purposes only and does not constitute any professional advice or service. Readers are requested to consult a financial advisor before investing as investments are subject to Market Risks.
About The author
After completing his schooling from St. Johns, Chandigarh (Class of 1980) and Modern School, New Delhi, (Class of 1982) Sandeep did his B. Com (Hons.) from Shri Ram College of Commerce, Delhi University (Class of 1985)
Sandeep is an alum of IIM Lucknow with a Post Graduate Degree (MBA class of 1988).
He has also written two books, ‘Dear Son, Life Lessons from a Father’ on the teachings of Life https://www.amazon.in/dp/1637815271 and the Second book which he has Co Authored titled, ‘What My MBA Didn’t teach me about Money’ on the Human and Financial perspective of money. https://www.amazon.in/dp/1637816502
He has a rich work experience and started his career as a corporate man with Asian Paints after IIML. He has a rich experience covering the FMCG, Food Distribution, Cold Chain, Logistics, and Hospitality Industries. He is currently in the Wealth Management and Personal Finance domain. He has a passion for finance and is an active speaker on topics in finance. The stories he narrates strike a chord close to his heart, as they are based on events from his own life. He believes in a holistic view of Personal Finance.
Sandeep’s investing experience and study of the Financial Markets spans over 30 years. He is based in Chandigarh and is advising more than 500 clients across the globe on Financial Planning and Wealth Management.
He has promoted “Sahayak Gurukul” which is an attempt to share thoughts and knowledge on aspects related to Personal Finance and Wealth Management. Sahayak Gurukul provides financial insights into the markets, economy and Investments. Whether you are new to the personal finance domain or a professional looking to make your money work for you, the Sahayak Gurukul blogs and workshops are curated to demystify investing, simplify complex personal finance topics and help investors make better decisions about their money.
Alongside, Sandeep conducts regular Investor Awareness Programs and workshops for Training of Mutual Fund Distributors, and workshops and seminars on Financial Planning for Corporate groups, Teachers, Doctors and Other professionals.
Through his interactions and workshops, Sandeep works towards breaking the myths and illusions about money and finance.
His passion has driven him towards career counselling for young adults and mentoring the youngsters on achieving their life goals and becoming “Successful Humans”
He also writes a well-read blog; https://sahayakgurukul.blogspot.com
He has also conducted presentations, workshops and guest lectures at professional colleges and management institutes for students on Financial Planning and Wealth Creation.
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