Jun 26


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I just remembered the opening lines of a song from the Hindi movie Barfi ,seeing the gyrations of the stock markets. A lot of my readers have been calling me or querying on what next and what to do?

  1. If you are fully invested, DO NOTHING.
  2. If you have idle surplus money lying around, INVEST IT NOW. May be in a mutual fund like PPFAS Long term Value Fund or cash rich businesses with no debt like NMDC, BHEL, Piramal Enterprise, Oil India and which are reasonably priced. 
  3. And if you are in neither category then keep doing TP (ie Timepass).

I watch with immense interest the happenings in the market. I got a call from a retired Lt General about a particular stock which he was holding for long. He said one report and analyst says, “Sell”. Another channel and analyst says, “Buy”. What should I do? I just told him to take the average of the recommendations. Do nothing and enjoy his evening Scotch. He had purchased the stock at a very cheap price and had been holding it for a long time. It was a good business. Over time his money had compounded well.

The next thing I often hear, “The markets are very volatile. What should I do ?”  Nothing is my response. Why? Because volatility is not  risk. Most investors confuse volatility with risk.  Volatility is a function of the stock markets. The markets cannot be constant throughout the day or a week or a month or year. TV analysts use this word very frequently, replace volatility with fluctuation. Markets will fluctuate. But is fluctuation risk? No.

Then what is risk in the stock market? Risk is losing your capital. And when do you lose capital ?  When you sell at a lower price. And when do you sell at a lower price ? When your purchase price is high. So if I were to concise risk in one word– risk is in the purchase price.

If you buy a good business at a cheap price (first business and then price) then you could just go to sleep for a few years, possibly go to Mars and come back, your money would have grown.

I am getting a lot of queries on GOLD. I only smile. Some readers quote my blog FOOL’s GOLD where in Sep 2012, I had asked my readers to stay away from Gold as an investment. It seems prophetic. The logic I gave has come home to roost.

Gold has declined from Rs32000 for 10 gm to Rs 26900 per 10 gm. About 19% decline. There may be more pain. I do get to have the last laugh sometimes. That’s ego speaking. Sorry.

Gold is a haven for black money in India. Who has the maximum black money in our country? Politicians, unscrupulous business men and government servants. That just about covers 80% of the country. The honest 20% also deal in black money when they buy or sell property. So, this nation which says me too whenever we talk of China, is actually run on black grease. Do you actually think we can come close to China or USA. Not in my life time. Am I a skeptic ? No. Am I unpatriotic? No, I am a realist. To come close to China, we need to clock 9% and above growth for at least a decade continuously and the day that happens, all stock investors can laugh to the bank. You could see the sensex close to 50000.

Till then keep praying for good governance and peace for the souls of the simple pilgrims and locals who got washed away in Uttarakhand. A black swan event.

I finish on a sombre note with a shloka from the Brihadaaranyaka Upanishad:

Sarve bhavantu sukhinah, sarve santu niramyah. Sarve bhadraani pashyantu, ma kaschit dukhbhagbhavet. Om shanti shanti shanti”  (May All become Happy, May All be free from Illness, May All see what is Auspicious, May no one Suffer. Peace, Peace, Peace.)


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