For almost everyone in the market, the word 'investing' conveyed the following meanings
- Buy high-quality stocks with long-term focus.
- Don't trade in them. Just allow the major story to play out.
- Management quality must be top notch and transparency is paramount.
- With a portfolio made of such stocks, you can sleep soundly!
Okay. No argument with that logic. It has been preached time and again and has become equal to gospel. There isn't a man around who shall dare go against those tenets.
But consider this.
Will this maxim hold through in the current markets? After all, these maxims have been created from decades ago and have been practiced without really being questioned.
But times change. Markets change. People change. Approaches change. Variables change.
Expecting maxims to live through those without any modifications could be difficult, then?
For example, if we take a list of the bluest of the blue chips of the market and built a portfolio of them, would that not be a dream for most new investors.
Let's see. We shall pick HDFC Bank, Reliance, TCS, Infy, Wipro, Bajaj Finance, Kotak Bank, SRF, Godrej Properties and Castrol.
All these are major stocks of the market, leaders in their respective field, with substantial market caps and hence would qualify as members of any portfolio.
Now, lets see what has happened.
- HDFC Bank gave 0% returns in last 5 years.
- TCS gave 0% returns in last 5 years.
- Reliance gave 0% returns in last 4 years.
- Infosys gave 0% returns in last 6 years.
- Wipro gave 0% returns in last 5 years.
- Bajaj Finance gave 0% returns in last 5 years.
- Kotak Bank gave 0% returns in last 7 years.
- SRF has given 3% return in the last 3 years.
- Godrej Prop gave 0% return in the last 6 years.
- Castrol gave 0% return in the last 10 years.
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Makes you pause and think, doesn't it? Maybe, with the exception of say, Castrol, every stock mentioned above will be in the portfolio of big investors, funds, AMCs, HNIs and any other category that you can think of. AL of them received Nil returns from these blue chip stocks.
So, does that mean investing over the long term is dead?
Of course not. It just means that the game has changed and the old adage of buy it and forget it maybe gone. Forever.
Now look at this bunch. I am listing another 10 names of stocks with large market caps and wide enough following and the kinds of return they have produced in just one year.
These are a bunch of very popular stocks and, as can be noted, they are also high market cap stocks. They are also very liquid, have strong managements with sufficient transparency by way of quarterly results, analyst calls etc. etc.
The returns produced by them are staggering, to say the least.
Note that I have not cherry-picked names of small cap stocks that have shown even more substantial returns.
So, what does this tell us?
Investing patterns have changed. It is no longer about buying and holding on to the so-perceived blue-chip stocks into the forever future.
Opportunities linger at every turn. Earlier, we could not spot them because we didn't have the means to spot them. Today, we do. With technology breaking down all dissemination barriers, the transmission of news flow is almost instantaneous, thus breaking down the old advantage of the "insiders".
Now, everyone can be an insider. If he tries.
It was not at all difficult to invest in the second bunch of stocks, given the public information available all through. If one just runs a cursory Google search on them, so many information points pop up. Those with more idea about other AI tools freely available today, even more details could be obtained.
If one looked at the charts of these stocks, the strengthening trend in each and everyone of them would be clear, no matter what trend following method was used. None of them, it will be found, taxed the holder's conviction with deep drawdowns in between to create any holding anxiety.
It is evident, therefore, from the foregoing that one now must take a different kind of approach towards investing. While there is no denying the value of long-term investing, it has now to be bulked up with market performance of the stock too. For this, simple elements of technical analysis need to be added to ensure that we don't get stuck with stocks from their images.
A classic example of this would be HDFC Bank. Earlier, there wasn't a bluer chip in the market. But over the years, from around 2021, the strong uptrend in force back then began to dwindle. A sharp technical analyst would have caught that change and would have made some changes. But those stuck with the image of invincibility of HDFC Bank as the best stock in the market would not have seen the change. And then paid the price.
The markets have speeded up, thanks to inroads made by technology. This has shortened the cycles and, thereby, the return focus of major players. Quarterly numbers play a significant role in the holding or investing decision made by major players like Institutions. Concentration of holdings among large holders (like FII) and their exits dent the trends rather badly and recovery from such blows becomes quite difficult, thus affecting the overall returns.
So, a multitude of new factors have now got added to the mix which needs to be heeded. Fortunately, all of them will dovetail into the price of the day and this will be captured by a sound study through technical analysis. Long-term technical analysis, therefore, has now become an important element in assessing a portfolio construction.
Markets have changed. Investing patterns have changed. It is time for investors too to change their behaviour.
Disclaimer: The views expressed in this article are solely those of the author and do not necessarily reflect the opinion of NDTV Profit or its affiliates. Readers are advised to conduct their own research or consult a qualified professional before making any investment or business decisions. NDTV Profit does not guarantee the accuracy, completeness, or reliability of the information presented in this article.
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