|“The stock market is a giant distraction for the business of investing” –John Bogle
Over the last few weeks, the equity market has been extremely volatile. As usual some of you might have started feeling uncomfortable about this volatility. Volatility is very much part of equity market feature. It’s all driven by sentiments.
The near term looks uncertain because the quarterly results have not been as per expectations. Our estimate is that the next quarter results will also be muted. The issues affecting sentiments are weak monsoon prediction & political hurdles for the government to pass contentious reform bills.
The current weakness is a great time to add equity. Our experience and data shows that investor who buys in correction have experienced better returns when markets rebound. Interest rate cut may happen to the extent of only half a percent.
We think that the factors affecting sentiment are of a temporary nature and should get resolved over time.
Theory of herd Mentality says -‘People panic. Not only do they panic, but they follow other people who have panicked, who are following other people who have panicked (repeat). Being in a thundering herd is most often not a good thing. To outperform the market you must leave the confines of the herd and be right about your reason for leaving. Our Experience is that course of volatile market gives lot of opportunity for the active portfolio to perform as investments are staggered and one always gains more.