In uncertain times, focus on the certainties | Value Research Investors should pay less attention to what they can’t control, and a lot more on what they can
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In uncertain times, focus on the certainties

Investors should pay less attention to what they can't control, and a lot more on what they can

It's an uncertain time. On the face of it, the story seems clear. Failing rupee, falling markets, rising inflation, rising interest rates, wars and sanctions, slackening demand and the western countries staring at a recession. Oh, and I almost forgot, parts of China still have intense lockdowns and economic shutdowns from their own virus. Sounds like big trouble on every front and in many ways, it is. Of course, some of these stories have a little more nuance than the screaming headlines will tell you.

For example, since the war began, the rupee has depreciated sharply. You would have heard this pretty much everywhere, including from me in the previous sentence. However, while it is down against the dollar, it's up against the yen, the pound, the euro and the yuan. Essentially, looking at it from another perspective, the US dollar is up against practically every other currency since the war began, of course with the notable exception of the Russian ruble. The rupee is somewhere in the middle of the pack. Still, that's a dull way of putting it and there are no clicks in it so no one will explain it like that.

It's a matter of perspective, and of trying to understand things in the number of words that fit in a headline, or at most a tweet. The LIC IPO is another such event. Just before the IPO opened, I wrote that as a matter of principle, as far as individual investors go, I'm against investing in PSUs as well as investing in IPOs. There are sound general reasons for this stand. Leaving aside the IPO question for the moment, there is at least some logic for making an exception to the PSU prohibition in LIC's case.

However, all that you hear now is that LIC had a lacklustre IPO. The reality is that while even a normal company cannot be judged properly for a long time after an IPO, LIC's uniqueness means that we will be in a price discovery mode for months or even years. This is just the beginning of the disinvestment in LIC. Just for 3.5 per cent of its total equity. A series of equity sales will happen over time, at various price points that only the future will reveal. Most importantly, life insurance is a relatively new industry for investors in the stock market. There are only three listed companies before this and they are all quite a bit smaller than LIC, obviously. On top of that, the LIC IPO opened at a time when the markets' general sentiment was weighed down by the litany of woes that I counted out at the beginning.

All these things have ensured that the long faces on TV notwithstanding, LIC's current market price is meaningless. We all know that IPOs are driven by punters who look for a day one sale and nothing else. I mean look at the fact that LIC was oversubscribed three times. So Rs 21,000 crore worth of stock was on offer and investors committed Rs 63,000 crore. Ten days ago, all these smart people were willing to buy at up to Rs 949 a share. Today, they are unwilling to buy at Rs 840! What happened to that extra Rs 42,000 crore? The answer is pretty obvious.

Coming back to the larger question of the dark clouds above investors' heads, the times may look unusual, but the ideal investor response needs to ignore all that. It's really just like the early days of the Chinese virus. As an investor, there are things that you have no control over and other things that you do have control over. The uncontrollables are all the items at the beginning of this article. The controllables are the inherent quality of what you invest in, how much you save, your asset allocation, your own readiness for personal crises and so on. When you think of it in these terms, it's quite obvious what you should focus on, and what you should ignore.

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