In his Annual Shareholder Letter in 2004 Warren Buffet wrote; “And if they insist on trying to time their participation in equities, they should try to be fearful when others are greedy and greedy only when others are fearful.”

Four years later in August 2008 during the peak of global financial markets crisis chaos, Warren Buffet bought 13.2 million shares of Goldman Sachs. These were troubled times for US Financial Markets, yet Mr. Buffet stuck to his principles and came out as one of the biggest winners from the financial crisis of 2008. Fourteen years later, his quote on Greed & Fear still remains one of the most relevant lessons for investors of equity markets. 

Recently in January 2018, Indian Equity markets touched new heights. Past 1 year returns of Sensex at that time was almost 30%. Though from January 2018 onwards, Indian equity markets (along with global markets) become highly volatile. Stocks sharply corrected in February and March, inched up in April-May-June but again fell sharply. And they are still falling!

So what is happening now? Let me summarise it as briefly as possible:

US Strengthening: US economy has bounced back from the depths of 2008. They have started increasing interest rates. Thus, foreign funds are withdrawing investments from equities & bonds (including from India) and investing their money back in US. 

Crude Prices, INR & CAD: Crude oil prices are rising in international markets. We are an oil importing nation, means higher out-flow of US Dollar. Foreign investors are selling Indian equities and bonds, means even more out-flow of US Dollar. This results in falling Indian Rupee and widening Current Account Deficit. 

Busy Election Calendar: Multiple state elections and mother-of-all-elections in early 2019 will keep both investors and markets guessing and on the edge.

Default scares: First it was IL&FS, a leading NBFC, which gave a scare to Indian bond markets when they defaulted on their re-payments to banks. After few days rumours about default by DHFL, a leading housing finance company, really spooked the markets. Equities started falling like a dominoes since then. 

On account of above mentioned reasons and many more; majority of media, news articles, broking houses and even people whom we regularly meet have suddenly become ‘fearful’. Time has come to recollect what Warren Buffet had said! 

Today, Sensex & NIFTY is trading almost 6% below their respective peaks. While, Nifty Mid-cap & Nifty Small-cap indices are trading at mouth-watering discounts of 18% and 30%. Barring eight stocks, rest of the Large-caps are also trading below 10% from their peak.

Embrace volatility as your friend!

Understand that investments in equities will always remain volatile. It may even fall by 50% or may shoot up by 200% in a single year. This should neither make you eager to invest more or to prematurely sell off.

Equities, while volatile, can create massive wealth for you. Though returns from equities will never be linear. If you do not need your investments for coming 7 to 10 years, put it in Equity Mutual Funds today. Remember, adding SIPs (Systematic Investment Plans) in your Equity Mutual Fund Portfolio can create a substantial return differential. In times like these when markets are volatile, SIPs can work wonderfully well to average out your existing portfolio. You may also use an innovative product called ‘Dynamic Equity Funds’ to balance-out your equity portfolio. Such funds changes their equity allocation from 30% to 80% depending on their respective quantitative models.

In conclusion, it is time to ignore external clutters and start building a sizeable equity portfolio to participate in long-term wealth creation story called “INDIA”! 

Wishing you a healthy, evolved & enlightened financial journey ahead!