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Markets are rather indifferent to political happenings

By Tensing Rodrigues*

As 2019 gets going, perhaps what is uppermost on an equity investor’s mind is the uncertainty. And the biggest unknown variable in that uncertainty is probably the elections. Not just because the outcome of the elections seems uncertain but also because the reaction of the market to a given outcome could be equally uncertain. And whatever the muhurat post elections, the markets have the habit of turning 180° thereafter. In 2009 the market went circuit up and then did not do much for the next two years. As against that, in 2004, the markets had crashed post-elections but had gone on to rally for the next three years. And in 2014, in spite of all the hype the markets showed no enthusiasm either before or after the elections. You might have noticed that the markets are rather indifferent to the political happenings.

This means just one thing. Forget about the markets let the elections happen let them throw the dice in anybody’s lap or throw up a hung parliament and let the markets swing any way. To use a currently hot phrase, just look at them as ‘the accidental markets!’

The markets are indeed accidental for they are sentimental. Just do what you feel is right; and that is all you can do. It is interesting to look at how the markets moved in the last ten years; and how you would have expected them to do before they moved. If you were in January 2010 you would expect a bountiful harvest by year end. During the previous year the markets had clocked about 63 per cent but they actually yielded about 18 per cent.

Next January, that is January 2012, you were mourning for a loss of about 26 per cent but by January 2013, you had made good that loss. January 2014 was more sober with an annual yield of about eight per cent. January 15 you celebrated for raking in about 28 per cent in the past year. But felt disappointed next January for the paltry 3 per cent. January 17 was no better. But last January you cheered for the 26 per cent only to get into dumps once again.

But look at the markets from afar not the January to January mood swings, but say, five year behavior. From January 2009 to December 2018 the return has been a decent 12 per cent annualised. There have been only two major deviations from this, but those too have been decent: about 18 per cent for the period 2009 to 2013 and about 7 per cent for the period 2011 to 2015. That gives some confidence, right? Well, that is what equity is: lambi race ka ghoda !

So, forget about everything, everything that looks worrisome or disturbing or uncertain, and enjoy a cup of steaming filter coffee; well, that has become very scarce now. See what has caught the fancy of the generation ext. No, leave out all that; it may give you a kick to start with; but it may kick you out eventually. Look for something more substantial. Twenty years back it was the IT. But that was the time IT was coming of age. It had the vigour; so it had the charm. Now one uses IT and discards it like panv ka juta. So do not bet on it. Finance is dicey it can ditch you any time. Moreover, both have gone beyond your and my understanding. All this ‘big data’ and ‘artificial intelligence’ looks very menacing. Personally I would prefer to settle for something more mundane.

What is mundane but still profitable? I just looked at the Advance-Decline ratios for the past year. Want to know, what performed the best? In alphabetical order: private banks, breweries & distilleries, cigarettes, computer software, electrodes & graphite, leasing & hire purchase, food processing, leather products, paints & varnishes, personal care, retail and vanaspati & oils. I am totally confused. For the moment, I will prefer to keep out of this hedonistic market and get back to my filter coffee ! Acche din jarur ayenge.


* The author is an investment consultant. Readers can send their comments and queries to investment.ideas.shop@gmail.com

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