Do you think these are the worst 4 words in investing? I do not think so. I think it is “Our backtesting shows that” !

However 2020 is different from the previous drawdowns that we have seen – the vicious ones like 2008, or even 1992. I am talking about Sensex – and so will not talk about 1987. Even in 2008 India may not have had so much of global investors – and worse computer based trading. In 1992 if I had gone into the ring I may not have sold into a 12% fall. It is tough. I remember selling Mazda industries at 650 – it had fallen from Rs. 1200 – and I had about 4000 shares. Phew. It takes some emotional Q to do that. However the end of HM was clear and this shit had to go to where it started – Rs. 9.50. Oh yes, I started there too! Not bad, considering it was short term capital gain!!! PC had still not made dividend tax free (which Mami took away).

Well today’s machines will just not care. If a client is short on margins, shares will be sold. If the security he has given is a YES BANK fixed deposit, it will sell the shares to make good the gap. If there is a stop loss in the trade it will be triggered.

When an FII has a redemption request in his home market he will give a sell call. When an FII gives a sell call – say 1 million shares of Reliance Industries – he may not put a downside limit. In such a case the share will plunge from 945 to say 799. Now 800 may not matter, but 799 could be a limit for many other traders/ investors/ etc. – I am sure you understand what I mean. Panic creating more panic because of mechanised trading is the first time in India. Now this by some foreigner for whom India is an insignificaant portion is a big problem. India based ETF may just sell unabated.

Let us say this brings the Index to (29k, 27k, 24k…pick a figure) – remember that this is the nadir. This would have been a vicious fall and it will look like a hot knife through butter. Not easy to see the LEFTMOST digit in your portfolio changing!!! btw I think I will see it today! It is not easy to sit tight. However do remember the following:

1. Sit calm – I have said this on 3 channels in 2 languages over the past 1 week
2. Sitting calm is not easy, but necessary. It is like an alcoholic sitting near a bar!
3. Talk to friends outside the market – please avoid Corona virus too!
4. Put your loss figure in the numerator and TOTAL ASSETS in the denominator.
5. Rememeber – this too shall pass. Oops cliched?
6. The long term investing – your goals are more than 10 years away, right?
7. If Sensex went from 42k to 27k every advice till 27001 to sell and re-enter will sound right – BUT IT IS ABSOLUTELY wrong. You did not have the knowledge right?
8. NOBODY knows where the falling will stop.
9. Professionals are guessing – some really hard guessing.
10. MF show off their Rs. 124 crore Volatility fund, not their Rs. 24,000 main stream fund.
11. Ask the MF for a weighted average return of all their equity schemes – you had no basis to choose their “best” fund did you? So chill.
12. Do not sell into a panic – it has never helped anybody. Getting scared is natural, but panicking is optional and foolish in this context.
13. Better safe than sorry – works only in the forest. In the market you can exit/enter partially.
14. Remember if you sell at 28k index, watch it fall to 27k – you may buy it back only at 32k – the recovery could be a small V and then flat for 5 months and then a dramatic big V taking it to 44k! If you missed the best 10 days, you might regret for the next 10 years. Don’t try timing.
15. Learn and do Vipassana – or some form of meditation.
16. If the volatility has hurt your family, confidence, outlook in life, etc. YOU must seek a good adviser with whom you can chat….you need a counsellor and a meditation teacher.
17. To do all this you need to build your mental, physical, spiritual, intellectual strength – and remember it is tough. If you can’t do its not your fault. Don’t kill yourself over it.

You have to worry about the media – they will start doing articles like “if you had kept your money in PPF for 10 years your gain would be more than index” or “Rs. 375,000 crores wiped out in 10 minutes of trade” or “Mukesh Ambani poorer by Rs. 100,000 crore in one week – remember all this is FINANCIAL PORN. You have to keep away from such shit or have the ability to laugh it off.

Caveat – i obviously benefit by your buying if I have a call option –