My routine this morning was interrupted by a text from a dear friend. The text had a link to an explanatory video talking a lot about lions and the way they look at life. Though I’m pretty sure the intent was to convey a life-philosophy, I could draw a more profound parallel with investors and investments in general.
Trust me, this gets interesting as you read on.
The documentary elaborated on how a lion’s courage, agility, and majestic gait justify its position as the ‘King of the jungle’.
But there was a section that was more captivating; the King of the jungle is helplessly vulnerable to none but one species – birds! While the lion is an apex predator and is never in a state of vulnerability, it simply can’t deal with the birds without losing its calm – and the birds in context aren’t the predatory ones, rather the smaller ones like the hummingbird.
The birds are known to notoriously sit on the far-to-reach areas of the lion’s back, tickle them or simply scratch with their tiny claws causing major inconvenience; however, the lion persistently keeps moving in an attempt to shoo it away and once done, continues life the majestic way.
This section of the documentary really made me draw a parallel between the lion and Indian equities.
While the lion is the King of the jungle, equities are dubbed as the King of asset classes. Just like the notorious birds cause inconvenience to the lion, even geopolitical and corporate events cause quite a stir in capital markets. And finally, just like the lion simply shakes the bird off and continues life the majestic way, Indian equities may go jittery as a reaction to events but finally continues to grow in a superior trajectory.
Now, let’s think of it this way. What if you’ve never seen a lion and you happen to just take a glimpse of it while it is frantically moving to shoo the bird away? You would probably spend your entire life believing that a lion is quite a vulnerable animal and continue wondering why the rest of the world acknowledges it as ‘King’.
Similarly, if one hasn’t observed and experienced the Indian capital markets for a longer period and instead focus on event-driven volatility, he would spend his entire life thinking of equities as a negatively unpredictable asset and keep wondering how the world’s richest attribute their fortune to equities.
In the context of Indian equities, it has been reacting to several developments on the domestic as well as the global front. As a temporary knee-jerk reaction, Indian equities may have seemed jittery but continues to maintain its stance as the most resilient economy in the face of a synchronized global slowdown.
Ref: Month-over-month performance of major global Indices as on Aug’19
One key takeaway for Indian investors would be to focus on the structural development underway, acknowledge the progress, understand the shortfalls in-depth and to continue believing in the Indian growth story while capitalizing on opportunities like a market dip to accumulate more because that’s exactly what the broader domestic markets are doing.
There’s an old saying – “collective wisdom always wins; not because it is right or wrong but simply because it has the power to steer”.
Ref: Domestic investors have been continuous buyers irrespective of how foreign portfolio investors reacted
Equity investors must continue stepping up systematic investment and transfer plans into a dynamic asset, balanced to large-cap oriented funds in ascending order of risk-taking ability, willingness and time horizon. The outlook for fixed income continues to highlight the opportunity towards the shorter end of the curve with the most aggressive being limited to medium durations; maintaining sovereign and AAA-rated bias.
