The market is teaching retail investors some old lessons

Past patterns of investors getting swayed by narratives are evident. The lessons learnt are less so

- VIVEK KAUL

The stock market is possibly teaching new and old investors some old investing lessons all over again. The Nifty 500 Total Returns Index, a good representation of the overall Indian stock market, has fallen 11.3% since peaking on 26 September. A 'total returns' index takes dividends given by stocks into account while calculating returns. But like all averages, the Nifty 500's fall does not give us the complete picture (All return calculations are as of 17 January).

While the overall Indian stock market may have fallen by a little over 11%, some of the stocks in sectors around which strong narratives were built by those in the business of managing other people's money (OPM) have fallen considerably more.

At a broad level, in the last few years, the OPM wallahs have really hard-sold the stocks of public sector enterprises (PSEs). This narrative fed very well into the nationalism story that has been hard-sold by politicians in power. But the public-sector story is now unravelling. The Nifty PSE Total Returns Index peaked on 1 August. It has fallen by close to a fifth since then. A 20% fall requires a 25% gain to recoup losses.

Within PSEs, the railways has been a much storied sector. The Nifty India Railways PSU Total Returns Index, which comprises 14 companies either owned by the ministry of railways or catering to Indian Railways peaked on 12 July and has fallen by more than 26% since, wiping off a 35% gain.

Further, defence has been another much storied sector. The Nifty India Defence Total Returns Index, which is made up of 16 companies, has fallen close to 23% since peaking on 11 July.