Power of Perspective

Hi!

Have you noticed how the newspapers, TV and the web are full of drama, bad news and negativity? I’d take a rough guess that more than 70% of the content offered on these channels has a negative spin.

For example, stories based on anger, homicide and terrorism are never far from our fingertips and eyes.

While bad news certainly sells (it never fails to capture the interest of readers and viewers), if you want to be happy, healthy and successful in life, you need to make sure that your mind is primarily focused on positivity.

How to do this?

By practising mindfulness.

If you’ve never come across mindfulness before, then think of it simply as consciously deciding to be fully present in each moment.

The idea is that when you place all your attention and energy on the here and now, negative thoughts and worries have no space to take over your mind and emotions.

Actually, there’s a simple and easy-to-remember technique called S.N.A.C.K., that will enable you to quickly move into a calm, focused state.

Here’s how it works:

Stop - just stop whatever you’re doing.

Notice - pay close attention to what is happening within and around you.

Accept - acknowledge without judgement the things you’re struggling with.

Curious - ask yourself questions like: What am I feeling? What do I need right now?

Kindness - respond to yourself and others with kindness and understanding.

Try this technique the next time you’re feeling overwhelmed or stressed out. I guarantee it’ll help you stay grounded, at ease and in control of your life.

Perspectiveness helps a lot in investing too!

Many fear that there will be a correction in the stock market going forward. However, anyone who has little knowledge about the stock market knows that the stock market movement is never linear. It goes up two steps, and takes one back. Nifty50 index has gone up by 27%, hence 10-12% correction should be expected. Does it sound difficult?

Ready to learn about the power of perspective while investing?

Relative Valuation Perspective for Large, Mid and Small Caps-

As of December 2023, the market cap shares for Large-Cap, Mid-Cap, and Small-Cap are 63.9%, 17.8%, and 18.3%, respectively. In comparison, the last five-year monthly average market cap shares stand at 70.6%, 16.2%, and 13.2% for Large-Cap, Mid-Cap, and Small-Cap, respectively.

In summary, Large-Caps are trading at a 9% discount to their last five-year monthly average, while Mid-Caps and Small-Caps are at 10% and 38% premium, respectively, over their last five-year monthly average.

Domestic Institutional Investors (DII) and Foreign Institutional Investors (FII) Flows-

FII flows in India remained muted in the last three years, due to sluggish global growth, and various geopolitical and economic challenges/ events. Meanwhile, DII flows, including mutual funds and insurance remained strong. In the current financial year till December’23, the Large-Cap category experienced a net outflow of 4,949 crores. In contrast, the Small and Mid-Cap categories combined received a total inflow of 51,640 crores (17,339 crores for Mid-Cap and 34,301 crores for Small-Cap).

India’s Weight in MSCI Emerging Market Index-

India’s weight in the MSCI Emerging Market Index has increased from less than 8% to more than 16% over the last ~four years. The India basket within the MSCI Emerging Market primarily comprises Large-Caps and larger Mid-Caps. This may be positive for Large Caps and Mid-Caps.

A Summary-

Large caps are currently trading at relatively attractive valuations, while small caps are at an all-time high weight relative to the total market cap as of December 2023. One reason for this is the strong DII flows, which have predominantly favoured Small and Mid-Caps.

In contrast, FII flows, primarily deployed through the MSCI Emerging Market basket, have received muted flows. Therefore, we believe, investors may consider exploring Large Cap Funds and Large & Mid Cap Funds for future investments based on their risk appetite and asset allocation preferences.

Before I sign off, let me ask you one last question:

Have you been struggling with the eternal battle of negativity versus positivity?

If yes, I’d be interested to hear about it.

Cheers!

Tejas