How to survive the market fall amid India, Pak war? Shankar Sharma advises

From now on, it will be a game of defence rather than offence that will determine how long you survive in the equity investing landscape, Sharma said.

First and foremost, we cannot expect the Indian stock markets to start reacting even before understanding what is the scope and breadth of this geopolitical problem between India and Pakistan. These things take time to play out in the markets, and they have simply been waiting to get a grip on whether this problem is just a small one or will it metamorph into a larger conflict.  That is why the market has been flattish and not reacted much to the geopolitical tensions. The market is not an instant pricing mechanism, and many times it takes time to start reacting to the developments.  As far as investing strategy is concerned, I have said this several months ago – publically and repeatedly – that the Indian bull-markets typically last between four and five years, and we are already in the fifth year of a bull-market that started in March 2020.    My 'lake of returns' theory very clearly said back in the middle of last year that the bull-market was an aging one, and that the returns from Indian stock markets for the next several years were going to be very poor.    Though India is in an amazing bottom-up market and we will occasionally find excellent companies at beaten down prices and valuations, the fact remains that the broad bull-market that we saw for around four-and-a-half years is over. From now on, it will be a game of defence rather than offence that will determine how long you survive in the equity investing landscape.  I have always indicated and advocated a multi asset approach to investing and it is in situations like these. Such an investing approach will make you survive. Having fixed income, gold other than your equities, will be your defensive strategy that will make you navigate the next period, which will be a lot more challenging than most investors anticipate.    Yes, mid-and-smallcap parts of the market will be the worst hit simply because their 'lake of returns' was overflowing with 48 per cent annual return since the bottom of the market in the pandemic. Large-cap returns were around half of that in the same period.  It is simply a truth of the markets that what gives you maximum pleasure will give you maximum pain, and what gives us maximum pleasure were the small-caps, and they will be the ones that will give us maximum pain.    (Shankar Sharma is the founder of GQuant Investech. Views expressed are his own. As told to Puneet Wadhwa)