I am not putting dates, but let us understand how a bear market starts…and how it ends (hopefully!).

Every bull market is followed by a bear market, and every bear market by a bull market. However everytime there is a bull market, we are willing to believe that “this time it’s different” – and then act surprised! I have been investing in equities since 1979, and have seen MY OWN BEHAVIOR – forget others!

So you saw the Index at 41,700 – almost 42000 about a month back. We all thought “this time it is different…and there is no reason for the market to fall”. In fact we were SURE that only an international event can cause a problem. Then the shit on Yes Bank happened. That event alone is likely to take the bottom off of the NBFC /bfsi segment. Smaller and weaker banks like Idfc, CSB, will not be able to build the liability side of the balance sheet. So was this the trigger or was it the Corona Virus?

Frankly when the market goes from 42000 to say 40,500 we are laughing and saying “these kids have not seen volatility”. Some clients (for whatever reasons, intellecutal or physical) get scared and shift from equity funds to debt funds. IFA / bank RM talk and laugh about this “stupid customer” who does not understand market volatility.

Next 3 days market moves from 40,500 to 30,899. This is a HUGE markdown – and happened say over 3/4 days. This is because unlike the earlier drawdowns this fall has been faster. Algo trading, increasing number of arbitrage seekers, better software -whatever – took its toll faster. Now when the client speaks to the adviser, the adviser is also shit scared. Remember his AUM has fallen by 30%, and his income is likely to fall by 40% – to start with. A scared man gives poor advice. So when the client pushes him,  the adviser says “I agree with you..you should exit”.

Then the market falls from 30,899 to say 27542. Now the clients who were told “See Subra Sir also said in his video ..https://www.facebook.com/iwoomoney/videos/vb.377437946326747/515749649109417/?type=2&theater 

are paranoid. They are willing to kill and roast the adviser. The truth is now both the investor (who has lost patience because some idiot told him that 5 year sip can’t be negative) and the adviser (who has sold Mf and Ulip saying – it will work in 3 years) are shit scared. So some more money gets pulled out.

Now think of the IfA – he is losing clients, aum, and income. The employee of the mutual fund has impressive charts which say “if you stay invested…you will earn 17%…”. The IFA is angry. The “investor” has vanished, and the Amc employee talks about his vacation.

Well, most people have thrown in the towel. Naren talks about “how infra and pharma have not done well” and Prashant Jain talks about PSU turnaround, but what they have on ground is a 28% fall in one month. That is the reality.

Then the market goes UP from 28000 to 31500 – people are in denial. The IFA says “Macro is down sir. Debashis Basu says “real growth is only 2.9% for the last quarter and the world economy is going nowhere. Great.

Market moves from 32,000 to 37000. Well, some panic buying. 5 new NFO launched. Suddenly in 3 days it moves from 37000 to 40,940. Well the client has switched loyalty. The IFA has migrated to Dubai where he is working in a bank.

When the client calls, the IFA is watching “Thappad” on his I-Pad. Client called to tell him that his bank RM has just sold him a Rs. 55,000 per month SIP in a product that has debt, equity, free switches..and TAX FREE investment aka ULIP.

The client was doing a 5500 sip with this IFA. This is the full anatomy of an IFA’s journey with his clients.

Now the market is at 51430, the IFA is wondering why his ulip is not doing well (it has 70% Gilt, 10% corporate debt, and 20% equity).

Well the IFA who sold this policy was celebrating his son’s education – he had got a paid seat in Carnegie Mellon. It was going to cost his Rs. 3 crores – including Post Grad.

Very clear lesson: If you want to send your kids to a good Ivy League it is important that many of your clients do nice big SIP.

#sarcasm.