The year was marked by greed and fear and first-time investors should come to terms with such a quick change in fortunes, according to veteran investor Raamdeo Agrawal.
Equity benchmarks swung between decadal highs and lows in the last six months. And this roller-coaster was triggered by fears about the impact of Covid-19 pandemic, not the impact itself, Agrawal told BloombergQuint’s Niraj Shah in an interview. Now, greed has started to seep in as people expect the markets, already at record highs, to be much better than everyone thought a few months ago, he said.
The first-timers and those who entered right at the top, say two years back, and have seen a decline, they’ve had a terrible time, he said. “They’re not able to explain what hit them, and they are blaming the managers and all for their losses, but this is the nature of the market.”
The advice from one of India’s most successful stock pickers comes as the pandemic created a new breed of retail investors who jumped into the market using platforms of discount or low-fee brokerages such as Zerodha. Called ‘Robinhood’ investors, after the U.S.-based no-fee trading app, they flocked to the market as lockdowns forced people to stay indoors.
They flocked in to ride the rebound from the record selloff as central banks and governments globally announced measures to support the economy by cutting rates and direct support.
According to Agrawal, the global macro is too complex. The world is awash with liquidity and the role and strategy of the central banks are crucial, he said, adding that the cost of money will be the biggest thing to track.
What this cheap money does is make finance available to the governments and companies for whatever plans they may have, Agrawal said. “With interest rates at zero globally, the world is now one bucket.”
Yet, unless an enabling environment for growth is created, the money will not come to India, according to him. If growth returns, he said, will percolate down to a broader set of stocks. Already, according to Agrawal, the benefits of the lower rates are now visible in second-quarter results.
Low rates don’t leave a choice for investors but to invest in return-yielding assets like equities, Agrawal said. But to generate returns, investors have to bring in discipline because they are up against the most-disciplined instrument, the index. That discipline, he said, is not to try and time the market—it’s a waste of time.