The key to discovering bargains is an understanding of value/ worth of a business. Prices often over or undershoot conservatively assessed value for various reasons. Future uncertainty and over reaction to continuing developments is one of the sources of this volatility.
Since the launch of the BSE Sensex in 1986, India has witnessed five events of seismic proportions – the 1991 Economic Liberalisation, the 1997-98 Asian Crisis, the 2000 dot-com bubble, the 2008 sub-prime crisis and the 2020 Covid-19 pandemic. Market movements during each of those times were characterised by very high volatility – rising and falling over 50% in short term. Even after these upheavals the Sensex has compounded by 16% annually (including dividends) in the last 32 years.
One key factor in climbing these walls of worries has been human tendency to fight, survive, adapt and prosper. The need to keep improving one’s life conditions amidst all hardships will always exist – more so in India today as it stands at under 2500$ per capita GDP. So long India remains a democratic nation and a free market economy, good businesses that can cater to the demand of a prospering India profitably will prosper. All we have to do is buy sensibly without overpaying. Volatile periods will be an opportunity to do just that.