A Bumpy Ride, But Worth It

Everybody likes to know the future. It's a coveted dream of many to foresee the future and accordingly make changes in the present. But who knows the value of future more than stock market investors? Their entire time is spent in anticipating the future. This great fascination to know the future has given rise to market pundits and their market strategies. But not necessarily everything market pundits says is a gospel truth. Stock market has made them eat their words on several occasions.

Let's shed some light on the uncertainty of the market, the events which surprise investors and have an unfavourable effect on the market. While we are on the subject we will also try to explore the possible solutions which can safeguard the interest of the investors.

Road Block # 1 - Government Policies

Government policies have a huge impact on the domestic markets. It's not always a negative impact, but sometimes implementation of certain tax or reduction in some subsidies have an impact on the related businesses or sectors e.g. if The government bans certain chemicals which are used for certain medicine, the stock of that pharma company may take a dip. Government holds the reigns of all the taxes, and it keeps making changes to keep balance, and to meet their financial targets.

But more often than not, such changes are not implemented in a knee-jerk manner. Many times investors see these changes coming which somewhat subdues its effect.

Road Block # 2 - Mergers & Demergers

These are more company-centric matters. Many times companies competing with each other, come to terms and agree to merge their businesses. The recent merger of Vodafone and Idea is a prime example of it. The effect of such events can go either side. If the company which is acquiring other company has strong fundamentals, it is very likely that stocks of both the parties will surge upward. However, if the companies are going through a lean phase i.e. heavy debts or strike or some impasse, it might bring the stock price down.

Sometimes companies decide to demerge the company and float a company for the business which has been separated e.g. Bajaj Finance and Bajaj Finserv are both listed. Similar to mergers, if the fundamentals are strong then companies deliver good results.

Road Block # 3 - Natural Calamities

Natural Calamities do have an effect on the international market. Though it entirely depends on which part of the world the tragedy has happened and how much dependency is on the produce or commodities exported by the affected region e.g. if due to some natural calamity Russia is unable to export oil to European and Asian countries it will have quite an unsettling effect on European and Asian stock and commodity markets.

As no one can predict natural calamities, it has an immediate effect on some businesses and a cascading effect which eventually percolates to the stock market. However, these are momentary hiccups and as soon as the situation stabilises stocks recover too.

Road Block # 4 - Major Global Events

In the age of globalisation where all the economies and markets are intertwined, major global events have a huge impact on the economies across the globe. By global events, we mean events which have the potential to move the businesses across the world. In 2016 we witnessed two such events - Brexit and U.S election. As the results of both Brexit and US elections went against the popular sentiment, it had a negative impact on all the markets.

Though markets recovered pretty soon after the unexpected result of U.S election, Brexit had a more intense effect. Brexit was UK's referendum on whether to stay or exit the European Union. As a majority of Brits voted for exit, Britain found itself in a position to realign all its business policies and trade agreements. This created quite a disturbance across the world.

How To Overcome The Road Blocks?

In the cycle of the market, there are always some road blocks. This is the reason why we call market a place of great uncertainties. However, the only way to sustain these uncertainties is to have a long-term investment perspective. To be honest, only intraday traders and short-term investors suffer the most due to these road blocks. Those who look for the 'Quick buck' schemes and Rakesh Jhunjhunwala stock tips usually end up losing money. But, if you intend to hold your stocks for a long period of time, you will outlive all the adversities.