If pundits, who have been proven wrong repeatedly, are right this time, this fall has perhaps not ended yet. Then again, perhaps it has. I certainly don’t know and a lot of other analysts, observers, investors and money managers don’t either. If you take these three assumptions together — one, nobody knows where prices will be in the short term; two, a fairly clear and growing long term picture; and three, the current fall is an opportunity to buy rather than a reason to cry — the way ahead is fairly clear.

It’s like a giant discount sale in your favourite mall, where the prices of four of five goods are quoting below yesterday’s prices. If you’ve identified your five good companies, maybe some of them are available at basement prices.

How have the experts performed?

Maybe all of us are financially illiterate and perhaps need to use the crutches of experts to get an exposure to Indian equities. So, I looked at the performance of mutual funds, the most transparent, most well-regulated (compared to the ease with which insurance companies selling equity products get away) segment of financial services with the maximum disclosures. The results are somewhat mixed.

Only half (or 37) the 75 diversified equity schemes I studied beat the Nifty (which rose 49.6 per cent) over the past year. Three out of four schemes (or 45) bettered the Sensex (which rose 45.3 per cent). On a three-year timeframe, again half the funds beat the Sensex, while 65 per cent beat the Nifty. The real good track record came over five years, when four out of five funds beat the Sensex and nine out of 10 beat the Nifty.

... contd.