Where’ll the Sensex be tomorrow?

Nobody knows how the stock markets will behave. Look at value, not price, and build wealth

Give some time flexibility to the last word — next week, next month, next year — and this headline could well be the most frequently asked question I’ve had to deal with, over the last 14 years or so. People of all hues, across all income groups and ages, in any profession, irrespective of the city they’re in, have asked me this question — the last of them being on a post-budget chat last week at expressindia.com. It is the third question I’m asked by total strangers (the first two being my name and job).

The answer has remained the same since 1992, when I started tracking the markets. Those were the go-go months when Harshad Mehta’s ‘buy-list’ was the most coveted piece of literature on Dalal Street, and which, after serving its purpose, was selectively leaked out to brokers, who added to it, embellished it, until it finally reached — through a series of sub-brokers — the retail investor. Who put in his money, saw it rise for a while, and then lost most of it. At that point, too, this was the key question.

Two years later, beginning July 1993, came the first FII-led boom, and brought this question back. When it crossed 4,000 for a second time, the question came back to life. Between May 1995 and November 1998, the market pendulum moved in a 2,800-4,300 band. The questions dried up and in my youthful folly I thought that was the last I heard of them. But no. As the tech boom began in early 1999 and the Sensex crossed 6,000 for the first time in February 2000, the question returned.

This questioning has a pattern. It comes when the Sensex has climbed beyond its previous peaks, is racing ahead and investors shift between fear and greed. At every trough, the question of its raising its head doesn’t arise. At every peak, it rises like the Phoenix, at least thrice a day. Since I began tracking it and now, the Sensex has risen by 8545.32 points, or about 610.38 points a year; the questions have followed this trend.

Behind all this exciting history, filled with exhilarating questions, lies a dull and boring answer: “I don’t know where the Sensex will be tomorrow.” Besides, if I did know, would I share that with random people? And even if they’re not random and I’m more philanthropic with commercial information, why should I share that with people for whom this information is merely a passing fancy of the day, who are not really going to be doing much with it? They’re not in it to make money, only to make small talk.

If investors were truly interested in making money, as in buying something at a low price and selling it at a higher price, knowing where the Sensex is going to be tomorrow would be the least of their worries. Good marketing, easy recall and a general explosion of the word ‘Sensex’ has turned this 30-share representative of the stock market into one of India’s biggest brands (even though NSE’s Nifty is bigger in every other way). But beyond that, whether it rises or not, is immaterial, irrelevant to making money.

Ask about ONGC and its prospects. Find out about Reliance and its future plans. Seek insights about NTPC and Bhel and their place in powering the emerging India story. Study how Indian steel demand ties in with global steel supplies, the highly volatile prices and where Sail or Tata Steel fit in. Keep the demands of a growing economy in mind and find out how a higher axle load on trucks is handing opportunities to Tata Motors and Ashok Leyland. How the Golden Quadrilateral, on both the roads and the Railways, will help companies ride a far more efficient transport sector towards profits.

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That’s where the money lies. And, even there the question to ask is not whether Hindalco will move up from its Rs 167.85 and by when, but whether its underlying profits and future prospects can support a PE multiple of 14.4. Don’t ask whether PSUs will get autonomy and what they will do with it. Instead, examine them through the lens of an asset striper and you’ll know the immense potential lying in many of these 60-odd companies. But you need to look at value and potential, not tickers and prices.

Yes, that’s right. This involves research, it means hard and consistent study, it implies serious effort, not short-cuts. But this toil is far less than what entrepreneurs and these companies sweat for in order to be where they are. If creating wealth through enterprise is not the road you’re walking, investing in them will definitely bring in the money. If you’re unable or unwilling to put in the hours or the mindspace, stay away from stocks and ride mutual funds. And please, don’t ask anyone where the Sensex will be tomorrow — he won’t know and if he did he won’t tell you.