Experts and the thali of wisdom

As I write this, the Sensex has taken what the financial media loves to call a ‘nosedive,’ dropping over 4.5 per cent in the past month. Right on cue, our ever-reliable market experts have served up their familiar thali of explanations, each delivered with the seriousness of someone who knows and understands everything.

The current favourite is geopolitical tension in the Middle East. Our market has suddenly discovered that the region isn't exactly a meditation retreat. Our experts are painting vivid pictures of how tensions between Iran and Israel are somehow causing stocks in Mumbai to quiver. Then there's the perpetual bogey of Foreign Institutional Investors (FIIs) selling Indian stocks. The story goes that they've discovered Indian valuations are high – a revelation that must have struck them like lightning on their way to their morning coffee despite these valuations being just as high in past months when they were busy buying.

The parade of explanations marches on with impressive variety. We're told about disappointing corporate earnings (who knew companies did not grow in a straight line?), high valuations (a problem that mysteriously matters only when the market falls), and the ever-reliable US Treasury yields. Banking sector results are apparently not meeting expectations, and FMCG companies aren't growing at the pace some spreadsheet warriors had predicted. It's quite remarkable how all these become the most crucial factor in the Indian economy, precisely when experts need a sophisticated-sounding reason for market movements.

And, of course, domestic macros and politics are lamenting about "stagnant tax collections" and what they perceive as a lack of economic action. And, of course, with elections on the horizon, every political whisper is treated as a market-moving event.

But here's what's truly fascinating: just a few months ago, I wrote about a similar situation in Japan, where their market dropped 12.4 per cent in a single day, only to bounce back 10.2 per cent the very next day. The experts there, too, had their kitchen sink of reasons – from the Bank of Japan's interest rates to the collapse of the yen carry trade – different markets with the same script, even if it had to be reversed the very next day.

This brings us to an inconvenient truth about market expertise: if you're looking for reasons why the market moved on any particular day, you'll always find them. They'll be logical, well-articulated, and utterly convincing. More often than not, they'll also be completely irrelevant to your long-term financial well-being.

As I’ve pointed out earlier, consider the past few decades. We've survived wars, oil shocks, the Harshad Mehta scandal, the Asian crisis, the dot-com bust, the 2008 financial crisis, COVID-19, and enough political drama to fill several seasons of a TV series. Yet, disciplined investors who stuck to basic principles like diversification and regular investing have done remarkably well through all this. Despite what the breathless headlines might suggest, the current market decline isn't particularly special. Yes, the Sensex graph shows a distinct downward trend over the past few months. But if you're investing for the next decade or two, this decline will likely be as memorable as last year's monsoon – which is to say, not at all.

So, what should a sensible investor do in these “turbulent” times? First, recognise that market volatility is as natural as the traffic in our cities – it's not going anywhere, and getting worked up about it won't help. Instead, use this opportunity to review your asset allocation. If the current decline is causing you sleepless nights, perhaps your portfolio is taking more risk than your temperament can handle. Successful investing isn't about reacting to every market hiccup or expert pronouncement. It's about maintaining discipline, staying invested through cycles, and regularly adding to your investments regardless of market conditions. This is the art of ignoring market noise while steadily building wealth.

Remember, if someone were perpetually scared of bad news, they would never invest. And wouldn't that be the biggest market folly of all? The next time you see experts deliver gyan about market movements with absolute certainty, treat it like entertainment – amusing to watch, but not something to base your financial decisions on.

For more columns by Dhirendra Kumar, click here.

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