Why 'Bhaav' is not 'Bhagwaan' in today’s world, explains veteran investor Basant Maheshwari

“Bhav Bhagwaan Che” is a Gujarati phrase that means “price is god”. However, well-known investor Basant Maheshwari, co-founder and partner, Basant Maheshwari Wealth Advisers LLP thinks that Bhaav is not Bhagwaan in today’s world because the long-term character of the market has changed to short-term punting. He believes that the price for the short term could be wrong. In the long run, Bhaav does remain Bhagwaan.

His views have come at the time when the benchmark equity indices BSE Sensex and NSE Nifty are hovering at their 52-week low levels due to heavy selling by foreign institutional investors (FIIs) and rising concerns over inflation. The 30-share Sensex has declined 12.60 per cent since October 1 last year, while the 50-share index lost 12.76 per cent during the same period.

While comparing the present fall with the historical bear markets, Maheshwari, who had made these observations in a letter written to investors, added that the difference between the bear markets of the previous years and now is the intensity and duration of the fall.

“The intensity has increased whereas the duration of the fall has compressed. Everything happens at lightning speed. Rome it seems gets built-in weeks if not in a day and the destruction also happens equally fast,” he said, adding everything gets priced in very quickly.

The market maven also added that modern-day communication tools like WhatsApp, Twitter and Facebook ensure that everyone panics at the same time. And because everyone panics at the same time everyone tries to exit at the same time. “The entire thing is akin to a Nazi blitzkrieg!,” he said.

Foreign institutional investors have sold shares worth over Rs 2.30 lakh crore since October last year. Commenting on the ongoing selling by overseas investors, Maheshwari said, “The foreigners who have been selling as if the markets will be shut for the next several years have three prime reasons to worry about. a) Dollar index hardening - they lose in terms of currency, b) Crude oil prices increasing - affects India’s macroeconomic setup and c) Global bond yields increasing - the opportunity cost of equity vs bonds increases.”

In his letter to investors, the portfolio manager also said that over the next 12 months the retail investor will match the foreigner with more vigour.

“If India’s savings rate is 25 per cent then in a $2 trillion economy the annual savings is $500 billion. Even if 10 per cent of this incremental savings find their way into the markets the net annual inflow will be $50 billion. That’s Rs 16,000 crore per day. The market works for around 240 days in a year,” he said adding it’s a matter of time before Indian investors take control of the market from the foreigners but right now they are only able to match them.

The market watcher advised investors that this is the time to pour money into the market if you have a long-term view. “We are getting these stocks because the immediate future ‘looks’ uncertain even though it might not be as uncertain as it looks. But this uncertainty will go away with time and prices will discount clarity and certainty. This is the best time to capture that transition by topping up your accounts,” he said. Maheshwari also thinks that many fast-growing companies are now available for better prices than what they were earlier.