Speaker A
So, we all know there's a war happening, and the effects are happening right here in India.
Explains India's stock market fall amid global crises, oil price impact, and investing strategies with portfolio analysis by Zerodha's Zero1.
Key Takeaways
- Stock markets react negatively to global crises initially but tend to recover over time.
- Oil prices and equity markets are not always inversely correlated; multiple macro factors influence markets.
- Trying to time the market perfectly is difficult; regular SIP investing often yields better returns.
- Supply chain disruptions impact inflation and market sentiment, affecting everyday investors.
- Financial literacy and disciplined investing are crucial for navigating volatile markets.
Summary
- The video discusses the impact of global events like wars and oil price fluctuations on India's stock market.
- It analyzes historical market reactions to major events such as the Kargil War, 9/11, global financial crisis, and COVID-19.
- Explains the correlation (or lack thereof) between crude oil prices and equity market movements in India.
- Highlights how supply chain disruptions, especially in energy and fertilizers, affect inflation and market sentiment.
- Emphasizes that markets tend to rise over the long term despite short-term volatility caused by fear and uncertainty.
- Introduces a portfolio experiment comparing a hypothetical investor buying at market bottoms versus a regular SIP investor.
- Shows that systematic investment plans (SIPs) often outperform attempts to time the market perfectly.
- Shares a personal anecdote about the collaboration between Zero1 and Zerodha to promote financial literacy.
- Encourages viewers to focus on disciplined investing rather than reacting to news and market noise.
- Concludes with a call to support financial education initiatives like Zerodha and Zero1.
Full Transcript — Download SRT & Markdown
Speaker A
What does the investor do?
Speaker A
We can already see that crude has gone up some 20% in the last few weeks.
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All these stocks which were already falling, all the indices which were already falling, continued to fall.
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So clearly, we are not in a normal time anymore.
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So in this episode, we're going to answer one major question.
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Should you buy equity right now, or should you wait for the market to fall?
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We looked at all the times crude went up a lot or went down a lot, and what the correlation is to equity, when should you buy, when should you sell?
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We'll answer all of this so you know exactly what to do today in your investing journey.
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And there's one more thing I'll do: I'll create an actual portfolio so we can understand which of the strategies from all of this analysis actually worked, so you can do it right now.
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So first, let's look at oil prices.
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Our entire country, like any country, runs on energy. Think about the entire GDP of any nation, you have transport, you have agriculture, people going to work, the buildings running, homes running, it all needs energy.
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And energy is imported.
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So, for example, this is the entire Gulf region, this Strait of Hormuz actually accounts for 40% of India's oil supply.
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And because there's a disruption here, oil prices have naturally gone up for us, and of course, you see the markets falling.
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But it's not just oil, we also have chemicals and fertilizers coming through this, which means India's food production is directly linked to this supply chain.
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I have some data here, and I can see that generally, when oil prices go up, food prices also go up.
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Like here, and here, and here.
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And what does this affect? This directly affects the stock market.
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So why are we talking about all this? We're talking because whenever a supply chain disruption happens at a global level, India reacts, stock market falls, ye sab mehnga ho jata hai, what is the aam aadmi supposed to do?
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I'm going to do an exercise with you, and you are going to play this game with me, okay?
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Most of this stock market, especially investing, is what's happening here, not what's happening out there, and I'm going to prove this to you in the next one minute.
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So, do this exercise with me, I'm going to go through all the events, and you're going to go through the events with me.
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First, I want you to imagine the Kargil War.
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Imagine what was the mahol?
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Fear, right?
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So, naturally, at that point, the market, surprisingly, didn't fall.
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And then over a period of time, one year, two years, the market actually did okay.
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It actually gave returns, so in this case, the market did not react to the Kargil War when this happened.
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Let's look at the next event.
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The Parliament attack.
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The drawdown was 7%, the market fell 7%, which means fear had taken effect.
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We had the 9/11 attack, 15% down.
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Iraq War, 9.85% down.
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General elections, minus 19.7%.
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A global financial crisis, 60% down.
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So are you noticing something? Every time there's an event, the market reacts and falls because the future becomes uncertain.
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Then let's look at the Arab Spring, it's almost 21% drawdown.
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Let's move forward, Pulwama, minus 1%, COVID, minus 37%, Russian-Ukraine War, minus 5.87%.
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Now, we know what fear looks like.
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Correct?
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We know what fear looks like.
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Now, let's see uske baad kya hua.
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One year change, not much happened.
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Okay, let's see two years.
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Do you see the pattern?
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Actually, there is no pattern.
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Sometimes the market recovered, sometimes it did not recover, for example, in global financial crisis, it didn't recover for two years, but in many cases, it recovered 100% in two years.
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But there is something common, what is it? Markets, especially growing economies like ours, tend to go up over a period of time.
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We don't exactly know the year, but we do know over a period of time the market will go up.
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But there is still one question left.
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What if you were able to buy at a low price and then make even more as the market goes up, correct?
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I know you've thought about this.
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So let's test that also, I'll create two portfolios, and let's figure out if there is some strategy here, but before I show you that portfolio, I wanted to show you this.
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This is really important, this is the oil prices of the world and Nifty.
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So let's see if there's a correlation, naturally, we will assume that when oil prices go up, then Nifty should go down, right, because of everything we discussed.
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So, is that really true?
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So here we can see that oil prices went down, and markets seem to have gone down.
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Then we can see markets continued to rise and started falling before this line, but oil prices continued to rise.
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So yahan pe you don't see any correlation.
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Then here we can see that oil prices bottomed out, and then the markets went up, oil also went up.
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If you map all of this on an Excel sheet and map all of these events and the prices of oil versus equity markets, you will realize that crude oil and equity markets are not inversely correlated.
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You cannot actually look at oil prices and decide if markets will fall or not, there are multiple things happening in macroeconomics and you can't just look at one metric and make a correlation and say this is the causation, this is why the markets are down.
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So, never ever look at the markets and the news together, they're designed to confuse you.
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Now, let's look at the portfolio strategy.
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This is a great portfolio strategy, I'll tell you what it is.
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I'm taking a hypothetical genie, okay?
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This genie has a superpower of predicting where the market will bottom, and he invests right at that bottom.
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This genie represents you.
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So let's imagine you have this superpower.
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This is Nifty, basically this is what you're going to do, because you have this superpower, you roughly invest right at the bottom, at the best, and roughly 5% from the bottom.
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And you invest 1 lakh rupees, on the other hand, we have Mr. Aam Aadmi, Mr. Aam Aadmi itna dimag nahi lagate hain, because this is very tough to do, so he just invests a large chunk in equity and say 15% in debt as an SIP every single month.
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Disclaimer:
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The asset allocation between debt and equity is taken for example only, which means Aam Aadmi ji has bought here also, this top also, up here also, up here also, up here also.
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But the genie has always bought at the lowest possible place as well.
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And remember, this person, Aam Aadmi, is also investing 1 lakh rupees a year, it's just that it's split every month.
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So, who do you think actually wins?
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And we have this data over here, and these are all the dates where the investment has happened.
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So on the first column we have date, second we have Nifty close, this is what we have to look at, Genie portfolio, Aam Aadmi portfolio.
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But before I tell you which portfolio actually won, I wanted to tell you something that happened in 2014.
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In 2014, I was in Ghaziabad, and I got in contact with Nithin, yeah, that Nithin, and we met at this restaurant in South Extension somewhere, then I was pitching him an academy, an education portal we can build together, and he really, really cared about financial literacy back then as well, so did his entire team at Zerodha.
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Fast forward to 2026, Zero1 is now two and a half years old, we've been building this together, and we could not have done this without Zerodha's support.
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Now, let's look at the portfolio strategy.
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Genie portfolio invests at the dip at 1 lakh rupees, Aam Aadmi 7,000 rupees, you know why?
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SIP, he's not investing the entire amount.
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Thoda amount.
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So Genie's already ahead.
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So now if we look at the return, just look at the return.
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The Genie's end portfolio is 33.25 lakhs.
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And this person over here, the SIP, is almost 42 lakhs.
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41 lakhs 89,000.
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Including the debt bit.
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So this has won by quite a large margin.
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If you thought any of our videos or this video you found useful.
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Towards our aim of financial literacy, show some love in the comments to Zerodha.
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And to Zero1.
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That's it guys, itna daro nahi.
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Don't look at news so much.
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Just enjoy your actual life, leave investing on autopilot, and just don't worry so much, okay?
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Bye bye.
Topics:India stock marketoil pricesequity investingmarket fall explainedZerodhaZero1portfolio strategySIP investingglobal crises impactfinancial literacy
