Remember 23rd March? A Year Later

[crixus123]

23rd March 2020, was a red letter day for Indian equity investors. A year ago, Nifty reached a real low point, closing around ~7.6k levels.

On this date, UTI Nifty Index fund had a 1Y return of -47.7% (NAV of 74.4731 on 25th March 2019, NAV of 50.4013 on 23rd March 2020).

This image should put things in perspective.

What back then no one could've known, was what's coming next. A historic bull-run, that'd go on to drive valuations up to astronomic levels.

It's not the fall that makes it special, it's what follows.

Some observations:

• SIPs that have been running for 7 years till March 2020, were in losses and not breaking even. This would prompt a generation of advisors to update their definitions of long term to be higher than 7 years.
• We've had people hopeful for Nifty reaching 6k-6.5k, so they could wait a bit before "deploying capital".
• There were those who started promoting dynamic asset allocation funds or other exotic "hedge" products.
• Those who've deployed significant capital around March-April 2020, would now go on to preach how their "PE-based" (or some other made-up strategy) ideas have done great, and every investor should follow these. You won't hear from these fair-weather talking heads when the next crash comes around.
• NFOs and IPOs have shown how everyone wants to cash in on a raging bull run.

If you're looking for reasons to not invest now, market would give you plenty of those. All the time.

A crash like that can be a teachable moment for lot of investors:

• If you had liquid corpus for emergencies parked in an asset back then, that made you worried; that asset cannot be where you park your emergency corpus.
  
  There were 2 weeks of Liquid / UST funds posting negative returns, every day. One day in March, even PPFAS Liquid Fund had negative 1-D movement.
  
  If that worried you, it's time to rethink your emergency corpus and where you're keeping it.
• People look at historic crashes and salivate how they could have made the most of it, if they were around at the time.
  
  In reality, historic crashes don't just crash the markets. It puts your life / career / family / well-being on the line.
  
  When a historic crash actually rolls around, last thing on your mind would be your equity portfolio.

For reference, I had posted this on 16th March 2020

 

[robo1988]

@crixus123 This was also the time I realized that while it is easy to say you will buy the dip / add into equity during a crash, it is quite hard to do it in a crash. I had some money then, but didn't do it fearing I'd need it if I lost my job or something.

 

[sandy123]

@robo1988 If you were saving that money to hedge against a job loss, then that wasn’t a bad decision.

 

[thomaswhitetw]

@sandy123 Yup...I was one of those who had it rough and had to dig into my emergency fund last year.

 

[heliumskylark]

@thomaswhitetw Your emergency fund served you when you had an actual emergency. Isn't that a win in itself? I don't think people should give in to greed and dip into emergency funds and funds earmarked for other short terms goals to invest in equity when market crashes. This is where financial discipline is required.

 

[tay1964]

@crixus123 I am gladful for all the things I could learn from my mistakes during this crash.

 

[ignatiusdidache]

@crixus123 Case in point about not timing the market, I put in a small amount in a Nifty ETF when Nifty reached 8k or so, and cashed it out at 13k ish thinking that it will go down again

Shouldnt have cashed it out...

 

[heliumskylark]

@ignatiusdidache Profit is profit. 62.5% profit from equity within a span of few months is a massive win whichever way you look at it. Never live with regrets. Market will continue to present more opportunities in future.

 

[oldschooljenny]

@crixus123 My learning - there would be lot of noises and cries around equity investment, could find couple of sane voices and am happy that I remain invested, even increasing allocation. On debt instruments, even though I was very cautious, it was an eye opener on how everything played out.

 

[eagle57]

@oldschooljenny How did debt instruments behave during the March crash?
What was your learning?
Am new to debt segment and am trying to learn it.

 

[oldschooljenny]

@eagle57 There were default for some bonds and then there was rumour of further defaults and again due to overall panic there were lot of redemptions from debt funds. So now bonds had to be sold off by debt funds to honour it and even good bonds had few takers. In US there is a junk bond market who would buy bonds at discounts but India does not have such an efficient system. And the result was chaos while it lasted. Again the Franklin debt funds fiasco did not help at all.

 

[gabby_123]

@crixus123 That was the absolute best time for investing. I started my portfolio then, currently sitting at 200% returns, or 3x my personal capital (approximately, it is slightly higher than that).

 

[resjudicata]

@gabby_123 Good to say in hindsight. But on that day, everyone was expecting Nifty to touch 4K. Consider your portfolio if it actually did.

 

[thaonguyen225]

@resjudicata On that day, many people were scared of losing their job and future income. Hindsight is always 20/20.

Its sheer goodluck that we are out of this pandemic sooner than expected.

 

[heliumskylark]

@thaonguyen225 Yup. It could have easily turned into a 10 year recession. Japan's Nikkei index never recovered from it's crash 30 years ago. UK's FTSE 100 is still below it's 1999 level. South Korea's market has been going sideways for the last 15 years. USA's Dow Jones Index traded flat for 17 years from 1965 to 1982 and then again from 1999 to 2013. India's Nifty traded flat for 12 years from 1992 to 2004.

Unless and until we have gone through a market phase like that once in our lifetime, we will never know what it's like to stay invested for decades and still not see any returns. It is only then that people wake up to the importance of risk management and diversification. But since the last 20 years of equity in India has mostly been sunshine, people are treating equity like a guaranteed returns product, especially new generation. I know a few people in my friend's circle who have gone 100% equity. Perhaps it will work out for them, only time will tell. But I like to be a little more cautious and balanced.

 

[gabby_123]

@resjudicata Sorry, I meant I waited for the market to stabilize a little bit before buying. Strictly speaking, April was when I bought, but very close to the bottom.

Of course, that threat is always there, but I don't really consider the Sensex or Nifty to be very important, just a general metric of some importance (not all metrics are equal). Nor are people's expectations that important unless one is shorting or something.

The most important thing was identifying good companies which had become cheap, because I knew long term that those companies would go up.

Hopefully I can say I've done that (so far, yes).

Obviously, I gave my family a heart attack by saying that I was going to invest all the money I had saved up and asking them if it was expendable (one should only invest expendable money IMHO). Then I gave them another heart attack by telling them which companies I was investing in.

But it worked out well. In fact, the more people expect Nifty to touch 4K, the better it is for investors. Lynch said investors need a strong stomach, and someday, my portfolio will dive to 50% of its value, hopefully temporarily.

I must be ready for that. Otherwise I'm not really an investor, I'm just a people person trying to invest and failing since investing requires absolute independence of thought absolutely non-negotiably at all times.

 

[4godabove]

@gabby_123 Wow. This past year would have been hell of a ride for you. It's amazing you've held till now. Most people would have at least taken out their initial capital once it became 2x.

Good going. You caught the trade of the decade.

 

[gabby_123]

@4godabove Haha, thank you very much. Appreciate the good wishes.

 

[nischansr]

@crixus123 Ah, what a year it has been. As I look back into my comment from the year ago post, I can't help but wonder how different it turned out to what I was expecting: both with respect to the speed of the recovery as well as the magnitude.

I did benefit from some buying around the bottom (not absolute bottom, but somewhere in April and onwards iirc, but the market recovery has been insane. And now I'm thinking how overheated this market is (not very different thoughts from, say, Jan 2020). And since I can't predict the future, I guess I should continue to stick to my basics.

Strange year, strange times!

 

[pushkin]

@crixus123 I remember that day vividly. I took a loss of ₹38L on that day as SENSEX fell more than 13%. It remains to be my biggest daily loss ever.