Learning From Mkt Turmoil And Power Of Doing Nothing

In volatile markets, the impulse to act can be overwhelming — but history shows that pa-tience and perseverance often lead to the greatest rewards. Drawing parallels with yoga-nidra and a quirky ad campaign, the article explores how "doing nothing" during market downturns, especially when company fundamentals are sound, can protect and grow wealth over time

In the last couple of years, a confectionary group launched an ad campaign where the protagonist does nothing or indulge themselves even as grave circumstances evolve. In the end, his act of doing nothing helps the situation and is greatly appreciated. There were series of ads with each in different situations while the seemingly adverse circumstances turn in the protagonist's favor as they do nothing.

The current market turmoil makes me apply that analogy. As the narrative turned contrary to the beginning of last year, the sentiment too slowly turned its head. Now, we see investors suddenly playing risk-off with bears taking over the stock markets. The continuous news emanating from the US on tariffs, trade policies, etc. only creates further questions about the prospects. While this too shall pass, could the investors let it pass is the question?

Warren Buffet famously said that "an investor should act as though he had a lifetime decision card with just twenty punches on it." What he meant is that investors should make judicious calls in their investment and take extreme diligence when they act. All the best-performing stocks in India or abroad have witnessed large drawdowns on their way to becoming multi-baggers. History is littered with many such examples.

For instance, PI industries which delivered 200 times (200x) returns in the last 23 years (2000-2023) have experienced over 25 per cent negative drawdown during the broader market correction of Oct '18 to Feb '19. It has recovered this in just four months. Eicher Motors which had given over 100x returns in about two decades from (2002-2020) had a 50 per cent negative return during (Nov '17-Dec '18) due to a slowdown in auto sales and GST impact while it took 18 months to recover from these lows. Similarly, Bajaj Finance Ltd, which has delivered over 50x returns in the last two decades (2003-2023) had a 25 per cent correction due to the NBFC crisis of 2018, it took only 8 months to recover from these lows. Of course, all these companies experienced over 40 to 60 per cent correction in the Covid crash which they've taken about 4 to 8 months to recover.

What one should observe in all the above instances is that the compounding i.e., the long-term multiple returns wasn't affected by these intermittent corrections. Particularly, when the reason for the drawdown is not company-specific but due to larger macro-economic issues. If the fundamentals of the company are intact, one should continue to remain invested if they already have exposure instead of exiting these positions, especially if these are not leveraged.

Taking a cue from yoga, I want to bring one learning to the investing. There are so many times in our lives when we're not aware of our body and our mind. Yoga-nidra is a way that combines our mind and body i.e., in sync. It's a practice in yoga where one rests (not sleeps) and draws attention towards each area of the body or body parts. This is an effortless exercise seemingly to do nothing except, but regular practice helps in release the emotions attached at each level. Thus, it acts as a detoxifying and reinvigorating exercise for both the mind and the body.

This act of doing nothing is a very important skill in today's time of information bombardment and attention-grabbing society. A 15-to-20-minute exercise of yoga-Nidra helps to not just clear pent-up emotions but helps bring clarity and fresh energy to the mind and body. Likewise, while investing, there are times when investors shouldn't let their emotions take control and rush to make decisions, particularly in a falling market where one converts their notional losses to real, they should exercise patience and perseverance to preserve their capital.

The act of doing nothing is powerful in investing too. In last week's article, I mentioned that the success of staying away from markets (if markets correct further) bolsters their understanding of the market behavior increasing their risk averseness, and making it difficult to re-enter. So, in these testing times, it's time to remain in the market that trumps over exits to come back.

(The author is a partner at Wealocity Analytics, a SEBI registered Research Analyst, and could be reached at [email protected])