Yet, you may want to accept volatility as a part of your life. Instead of complaining about it, you should accept that there will be times regularly in your financial life when things will not go in your favour.
When there is uncertainty all around you, it is essential to stick to fundamentals and knowledge. Over the past week, as share prices fell across the board, shares of the National Securities Depository Limited (NSDL), the nation’s first depository, started trading on the Bombay Stock Exchange. They closed at over Rs 1,300 per share against the IPO price of Rs 800. That is a significant jump when you think about the turmoil witnessed in financial markets.
The company is a profitable business with little or no primary capital requirement. The listing of the shares was due to the need for existing shareholders like the National Stock Exchange, IDBI Bank or the government to exit. The company makes steady revenue and profit. Despite all the hype around investor education, only 8% to 9% people have a demat account. Going forward, the two depositories, NSDL and Central Depository Services Ltd (CDSL), will continue to garner new account holders. The depository business may only need capital for any future technology expansion. Otherwise, with the help of early shareholders’ money, these companies have already created a growth engine. That possibly explains the successful listing. Shareholders can see growth in future revenue and profits despite all the chaos in the external environment.
Many pundits advocate for a ‘bottom-up’ approach to investing when share prices continue to rally relentlessly or there is turmoil. Aligning your expectations with the future growth is a good way of investing. That is because share prices always follow future profits. It is your knowledge and understanding of this alignment that protects you.