Time for voluntary asset churn

A weak rupee brought back fears of a widening CAD and high inflation. That virtually sealed hopes of a rate cut in June. RBI’s hawkish stance further toned down investor expectations on a rate cut. The markets turned soft through the week factoring in the fiscal worries, economic expectations and the currency outlook. Getting forex inflows from non-trade sources is the challenge before the FM. Investment flows hold the key to market direction. With the currency so precariously perched, the FII’s investment behavior matters more now than ever before. The coming weeks will see how factors that impact sentiment play on the FII’s psyche. The monsoon will take control of market sentiment if it sticks to course and investors should track it closely. If the monsoon delivers, FII inflows will rain the bears out.

Staying ahead of the curve is what separates the smart investor from the herd.

Invest speak:

The phrase ‘intelligent investing’ is closely associated with the value investing school. Investing in companies below their intrinsic value is what the discipline of value investing teaches investors to do. An important facet of the study of value investing is the emergence of behavioural finance as a great supporting tool. Why do investors behave in a particular way when it hardly makes sense to do so? Behavioral finance has explained the irrationality in investor behavior. Though simple to understand, investors haven’t risen above the most common follies. Buying at life time high, getting into a frenzy as a herd, investing too much money in one asset class and having a lopsided asset allocation are some common follies. Investors must overcome these follies now more than ever before. Assets price behavior will churn swiftly over the next 18 months.

Churn your asset mix voluntarily. If you don’t, the market will force it on you.

 

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