Herd Mentality vs Fundamentality
I would like to touch upon the prevalence of herd mentality amongst a large portion of Indian investors, wherein the investor to safeguard his wealth would follow the footsteps of what most of the others in his circle are doing.
Such blind belief in copying others actions will just leads to having the same result as theirs and a satisfaction that that’s one’s losses or gains are not of one’s own . This best sums up herd mentality and it’s a shame that educated people without sparing time to read and actually think for oneself literally allow the decision making to others whims and fancies.
The financial dailies are filled with news bulletins about the crisis in America and Europe, and unfortunately since our markets are interlinked there is some degree of indirect/direct effect. It’s sad that investors think globally and not locally, I am again underlying that you should assess whether global effects will have a direct impact on your portfolio. Well read economist point out that India’s growth story is intact, however we are going through a pause phase, much due to the government’s procrastination on already approved pipe line projects due to local internal turbulence which has nothing to do with Europe and america’s self made disaster.
Our governments financial decisions unfortunately have to be played keeping in mind the varied complex participants who have to be looked after as they have a direct/indirect seat in the constitution. Financial decisions in reality are not a sequential (mathematical) occurrence of events but rather a complex art in which all the participants both corporate and civilian have to keep in the mind by policy makers to bring about a policy that is accepted by all.
I personally have a lot of faith in the financial decision making abilities of the government as they are in the interest of keeping sane a large scheme of things than just financial progress. This upcoming budget in Feb 2012 could spell heart break for the herders who will easily get swayed and deal in knee jerk reactions, but the fundamentalists who would smartly calibrate they position keeping in view their long term goals would smartly sell only those investments which show panicky behavior and themselves prove they are herders. I would like to conclude that stay away from developing a herd mentality rather transition to fundamentalist view with the objective on how market behavior will affect you.