Should an investor worry about macros?

With oil prices firming up, the rupee plunging and trade wars in the news, Jai and Veeru discuss if macros should matter to the mutual fund investor. Veeru: How have you been, Jai? Frankly, I'm quite worried about the stock market. Since January 2018, oil prices are up 9 per cent, the rupee has fallen 9 per cent against the dollar and interest rates have shot up close to the 8 per cent mark. Now there's talk of global growth hitting a speed-breaker, too, because of Trump's trade wars with China. I'm worried there's a big crash in the offing. Maybe I should sell some of my equity funds and move the money into liquid funds? Jai: Hey, don't do that. We had a very similar scare with 'taper tantrum' in August 2013. The rupee was depreciating, rates spiked and the stock market fell. But you know what, in hindsight, that proved the best time to invest both in debt and equity mutual funds. Both delivered double-digit gains from that low point. You may not be brave enough to buy when there's blood on the street, but please don't sell! Veeru: True, but it is very hard for an ordinary guy like me to make sense of bilateral trade issues or oil politics. Jai: Ha ha! Don't worry, even celebrity investors struggle to interpret Trump's tweets! Veeru: Jokes apart, I wish mutual fund managers made sense of these macros and positioned their funds accordingly so that we don't lose money. Why can't fund managers take a more defensive position when the macro factors turn negative? They can raise their cash holding or buy defensive stocks like FMCG or IT. But too few equity fund managers in India seem to care about the macros. They all love

This article was originally published on October 18, 2018.