Samvat 2079: Anecdotes on Indian Economy, Trading, Investing and bonus book tips!
Let not the ability or inability to explain any event logically take away the opportunity of making returns from them (both monetary or otherwise)
Samvat 2079 (Samvat is an historical calender used in Indian sub-continent) is knocking at our door. Looking forward to another year with heart full of hope, I can’t help but take my eye off the rear view mirror on how difficult Samvat 2078 was for an average investor to make money in it. NIFTY delivering absolutely flat returns in this period (+0.25% to be precise)!
I am certain that like myself, you too would have come across thoughts, social media posts, articles or videos at some point during the last year on how this is India’s decade (even century) or how time for India economy to shine has come. The only silver lining on a period otherwise ripe with inflationary & recessionary fears and geo-political unrest globally.
Comparison of how the benchmark indices of major global economies performed is one among many data points that can be used to drive home the point of out-performance of Indian equities and in turn India, in a shaky global macro environment.
My recent holiday trip to Alps gave me my anecdotal evidence on this Indian economy. Deserted towns, neighborhoods & shops, graffiti across buildings & walls of almost all major cities including prized pubic transport etc. The only places thriving with some economic activities were the sightseeing spots with majority of tourists being Asians, notably Chinese, Koreans & Indians.
Humans find lot of comfort in being able to explain the theory behind any happenings around us. And if we can’t, look up to someone else who can. Financial markets are no different. Why the event happened exactly this way among the other possibilities, why it was expected to unfold like this etc. We love to devour such explanations.
The dicey part being most of such explanation follows the event, only once it has unfolded. And by the time it has became evident & obvious there are no returns to be made in that opportunity. Like being positive about equities in March 2020 when world found itself standing in front of its doomsday (at least that was what was being said then). Or when war broke out between Russia & Ukraine.
All market crashes of past are missed opportunity and risk in future.
Few months back I shared yet another anecdotal evidence on why I have always given more regards to prices on the chart rather than logical explanations which unusually follows, much later. Hope this line of thought will benefit your investing journey.
Reading charts & understanding fundamentals of a business are often at logger heads with one another. Each school of thought with their ardent followers fighting for supremacy. Having spent time at an Institutional trading desk, I have seen this up close & personal!
But, the smartest of the lot looked towards both these way of studying stock markets as complementing each other rather than competing. They often found themselves on the right side of the market.
But how to get working knowledge of these beasts called Technical & Fundamental Analysis?
Diwali is here! Its an auspicious day and I want to gift you the recommendation of 2 books (book tips cause you would already have many stock tips) which will give you a good working knowledge of both Technical & Fundamental Analysis. Helping you appreciate that underneath it is the same engine - human reaction to greed & fear. Which in turn will make your investing experience & performance better.
TECHNICAL ANALYSIS OF STOCK TRENDS - EDWARDS & MAGEE (Link)
One of my early days on trading desk, my manager’s manager (Head of Institutional Equities) saw me staring at a price chart. He went back to his cabin, bought an old 1990 edition of this book and handed it to me saying ‘This is the only book that you need’. Today 6 years later I can’t agree more. There are no dearth of books on Technical Analysis both by Indian & Global authors. But if there is a master book to jump start your chart reading abilities its this one!
ONE UP ON WALL STREET - PETER LYNCH (Link)
My father is an pre-Harshad Mehta era investor and this was one of the first book that he handed over to me when I was beginning my investing journey, back in 2013. Unfortunately this book was just gathering dust, until I decided to pick it up about a year back to realize the numerous missed opportunities that went past me in these 9 years, only if I had read this book alone.
Fundamental investing is lot of number crunching & complex multi-spreadsheet modelling if you are a professional analyst. If not, then its just little bit of commonsense.
This book specifically talks about how can you use your existing knowledge about world and how it works, elementary math etc. and make bets on stocks market which are probabilistically in your favor. Needless to say you definitely don’t need a CA or MBA in Finance (like me!) to read this book or apply what is being said by the erstwhile star fund manager of Fidelity Investments -Peter Lynch.
Instances when there are no available logical reasoning for an event are opportunities which offers the best returns. This is why often successful Entrepreneurs, Athletes etc. are found to speak about the element of luck. Like Virat Kohli speaking about India’ mind numbing, heart stopping last ball victory in yesterday’s T20 world cup.
“Mujhe actually samaj nahi aa raha hai isko explain kaise karun” - Virat Kohli
Let not the ability or inability to explain any event take away the opportunity of making returns both monetary or otherwise from it.
Wishing you & your loved ones a very happy, joyous and safe Diwali & prosperous Samvat 2079!
Hope you found this article thought provoking & interesting. If you missed reading Navi Technologies: Can it break tech IPO’s bad patch? by Dalal Street Rafting check it out below.
Disclaimer: Views presented in this article is personal opinion of author and doesn’t not represent any firm’s view that he is currently associated or might have been associated in the past. No part of it should not be considered as a recommendation to buy or sell any stocks etc. This is an educational article at best. Although care has been taken for correctness of the data, author does not take any responsibility for any errors or omissions. Readers should consult their financial advisers before taking investment decision.