E-Paper
It’s an opportunity for investors to buy the dips
YOU CAN’T argue with democracy. Around 52% of UK citizens who voted, want to leave the EU and that’s that. I know that almost the entire global commentariat has labelled these 52% (17.41 million people) racists, bigots and much else. That’s understandable because democracy just doesn’t make any sense when people choose something one doesn’t approve of, a feeling that our own domestic commentariat knows well. Now there are petitions to hold another referendum, in the kindergarten spirit of asking for ‘best of three’ when you lose a game. But this thing is done. As some observed on Twitter, if you didn’t want to hear the answer, you shouldn’t have asked the question.
For investors who had become sanguine because of the general expectation last week that the UK would remain within the EU, the result and its impact on markets came as a great shock. In India, individual investors who have little reason to keep track of global events and equity markets’ sharp fall, on Friday triggered something like panic. The first thought was whether this was going to be a long and deep crash like the one in 2008-09. Predictions ranged from a full-scale global economic disaster down to a just some minor problems for everyone except the kind of people who voted for leaving.
Of course, anything can happen. We’ll probably see more of it as the exit urge spreads across Europe. I’m of the opinion that there’s some probability that the UK’s exit vote is only a first in a long series of events. However, it’s likely that the extreme reaction of the Indian markets that we saw initially has no significance in the long term. For equity and equity fund investors who are long-term investors rather than daily punters, the slump in the markets is important not because it’s a slump, but because it’s an opportunity to buy good stocks at a discount.
Just like in 2008, those who kept their heads cool were able to convert the crisis into opportunity. The UK’s exit may actually be an opportunity in disguise