Markets, mindsets and the India story

One of the greatest perks of my job is the opportunity to travel about two weeks a month and meet people all over the country and sometimes even outside. What is at the top of people's minds, what are the quirks in their thinking, all of it becomes evident.

I meet investment advisors, mutual fund distributors, family office managers, public gathers of investors and advisors and investors themselves. In almost all meetings, there is eventually bound to be some discussion on 'market kya lagta hai'. That discussion cannot be meaningful unless it is correlated in some way with economic and corporate performance expectations and related perceptions.

In recent times, the concern has been related to the US political transition and its ramifications for geopolitics - short term as well as long term, the US monetary policy and its impact on our external macro and monetary policy, India's poor GDP growth numbers in H1 FY25, slowing corporate earnings growth, the upcoming fiscal budget and policy, et al.

Many commentators have also pinned hopes on H2 FY25 making up for H1 FY25 by pulling up numbers. A good agricultural season followed by the festive season and weddings is cited as a driver of consumption pick up, as is the fact that in the first half, we lost time in general elections, government formation, budget formulation, announcements, etc.

I recently attended a meeting where one of the attendees remarked that we have a record-high number of weddings in the country this year. I am guessing he read this, and I am quoting from an Indian Express online article, which, in turn, quoted a report from broking firm Prabhudas Lilladher: 'India is projected to witness 35 lakh weddings between November and mid-December 2024, up from 32 lakh weddings during the same period in 2023. This is expected to generate an estimated expenditure of Rs 4.25 lakh crore'. I told him not to be surprised if we have a record-high number of weddings every year for the next 15 years.

Let me share another common observation. Many commentators have said that in the last few years, the unprecedented pace of addition to, or rather, multiplication of mutual fund SIPs (systematic investment plans), broking accounts and stocks and futures and options traders is attributable to the fact that markets have been on a tear. One must somehow remind them that the market has been going up and down since time immemorial, and each time, tailwinds draw in numerous investors, while headwinds demotivate some from participating; that's nothing new. But then why a sudden explosion in this particular market cycle, where I have to say multiplication instead of addition, where growth rates are geometric and not arithmetic and as much as compounding of returns, we are witnessing a compounding in investors' numbers?

Discovering biases in investors' and market participants' thinking is something that interests me. And I don't know if there is a name to this 'we knew it would happen; in fact, we predicted it would happen, but when it happened, we couldn't recognise it' bias.

All these friends of mine have been discussing the great India story, India's demography and how she will do it, but when it plays out for at least 20-25 years and yet, when it is playing out in front of their eyes, they attribute it to 'cyclical phenomena'. Every structural move will have intermediate cycles in which people will extrapolate the underlying structural shift on a faster trajectory, then realise it's slower than expected, then readjust and correct only to eventually undershoot and then again overshoot after the trajectory catches up. But amidst all this, it is very important not to lose sight of the overall direction.

In every single year age bracket like, say, 19 years, 20 years, 21 years, 22 years, 23 years and so on and so forth till one gets to about 35 years of age, India has around 2-2.25 crore people. Don't be surprised if some or most of them (both some and most being very big absolute numbers) want to get married or start investing in the coming years.

The other bias I have discovered in these conversations is that every generation thinks the coming generation lacks intelligence, understanding, foresight, etc. In fact, my experience tells me that when it comes to today's young Indian, the attitude, aspirations, risk-tolerance as well as educational and socio-economic backgrounds are very different compared to when I was young (not telling you how long back). The market regulatory framework, technology usage, market structure and sophistication that they are seeing is not what we saw. So, judging how today's youngsters will react to market developments from the lens of how I reacted a couple of decades back would be foolhardy.

Every generation thinks the coming generations don't know enough or don't know right, but what does the lived history of the world tell you?

Aashish P Somaiyaa spearheads WhiteOak Capital Asset Management Limited as their CEO.