2022 Investment Special: Bulls, bears, pigs and chicken of the street

Remember this day, or thereabouts, two years ago? Like in the United States and many other countries, there was only one way to stay clear of the Covid-19 virus: A lockdown. As industrial activity came to a dead halt, stock prices crashed, oil prices turned negative, and currency markets felt the sharp contagion effect.

The mood was of fear and uncertainty. The BSE Sensex may have been an accurate barometer, tumbling from a mid-February 2020 high of a little over 41,000 to around 27,500 by early April—a loss of roughly 30 percent in less than two months.

The unnerved booked losses. The cautious battened down the hatches. And, for many of the old hands—those who rode out 9/11 and the 2008 global financial crisis—opportunity soon beckoned.  

Fast forward to October 2021. A fortnight before an early November Diwali, the Sensex scales 61,000. Fuelled by easy liquidity, the benchmark indices have more than doubled from the early pandemic bottom. While fears of a disconnect between Dalal Street and the real economy are voiced in certain quarters, the herd on the street is nonplussed. As is the norm at every peak, every other average Joe and Jyotsna is hunting for the next multibagger, tipsters are lowering their masks to dole out advice at cocktail and kitty parties, and fools are treading where angels usually do in saner times. They’re sanguine there’s a ‘Greater Fool’ lurking at the bend of the road, waiting to lap up their overvalued bouquets.

Post mid-January—the last time the Sensex flirted with 61,000 levels—the fools and Greater Fools have been shaken out of their euphoria. Putin’s war in Ukraine has unsettled the global economy, and markets have duly corrected. The Indian indices were down 8 percent from their peak (as of mid-March), and the bull run has ground to a halt, although at the time of writing the indices had rebounded. But the volatility may be here to stay.  

If you look back from this point, it’s obvious who the winners and losers are—those who got in or increased their exposure in the early days of the pandemic, and those who attempted to ride the boom late last year, in that order. But there’s another breed that has quietly reaped in more than modest gains—the investor who has stayed calm right from March 2020 till date. She didn’t book losses at the start of the pandemic when markets began their freefall. And she didn’t feel the need to join the frantic herd at the peak. Yet, at today’s prices, the wild oscillations notwithstanding, she’s still comfortably in the black from pre-pandemic market levels.

So how do you navigate a treacherously volatile market hereon? That’s the theme of this fortnight’s Investment Special, helmed by Salil Panchal. Perhaps the best advice, as Monica Bathija writes, is to do nothing. If you are invested for the long term, there’s little reason to panic; just follow the ground rules. F
 
So is a period of volatility a good time to look to build on your portfolio? Perhaps, but as Neha Bothra writes, only if your horizon is long-term and appetite is for high-risk.
 
Our Cover Story is on investing of a very informed kind —by a specialist who has turned funder after founding one of the world’s best value creators in IT services. After co-founding Cognizant 28 years ago and leading it till March 2019, Francisco D’Souza floated a private equity firm that announced its inaugural fund of $1.25 billion early this year. The mandate: To identify tomorrow’s winners in IT services. Harichandan Arakali has the story on page 34, which also delves into India’s critical role in this global play.