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Monday, September 26, 2005

Slow and steady on the stock market

Devangshu Dutta writes in DNA:
In the Melbourne Test of 1907-08, the English last wicket pair of Sydney Barnes and Arthur Fielder needed to get 39 runs,while the Aussies, of course, needed one wicket. Most tailenders would have tried to hit the runs off and probably got out. After a mid-pitch conference, these two decided to 'get singles'. They held their nerves and inched to a one-wicket win, batting through an excruciating hour.

Although less spectacular, slow and steady methods can be even more effective than big hitting. Investors need to remember this at a moment when the Sensex is gaining more than 500 points a week and then losing 260-odd points in a single session.

Here’s some perspective. The market lost about 4% last week -- that’s a tiny correction compared with that in March-April 2005, when the market dropped over 13%. But a huge single-session drop makes much more of a psychological impact just as a sixer is more memorable than six consecutive singles in an innings.
Dutta predicts that in the next few weeks, "[b]ears will wander from sector to sector selling and, as they lose interest in a given counter or a given sector, covering and moving on, value investors will get in." Read the full piece.

Cross-posted on The Indian Economy Blog.
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