How worrisome is the slowdown?

Dhirendra, let's first get to the reasons for the current economic downturn. What are they?
Dhirendra: The economic downturn is actually deceleration of the growth to be very precise. We are growing but not at the pace we were growing at earlier. The pace of growth has slowed down. And it's quite understandable because of the kind of changes that we have witnessed in the last three to four years. The operating system that we have now has completely changed from the one we used to have earlier. There's been a resetting of many things.

Earlier, did you ever hear about a business going bankrupt in India? Now they do. Many businesses could get away without getting into the tax ambit prior to GST. But now they can't. The changes are irreversible and not small. It will take time to settle in but the results will be positive. Many people are of the opinion that this will last for two to three quarters. But I don't know. It could be longer. This can also turn out to be a big shake-up for certain kinds of businesses. They may get phased out and certain businesses may actually thrive and prosper as a result of this.

Also, the economy is cyclical. Over the last 20-30 years, it has never been that we have always grown at a steady pace. For a few years the rise was rapid while for some years it was slow. That's the natural course. And this time the reasons are external. The operating systems have changed in a way that they are having an impact on the way businesses conduct their affairs.

Of course, something needs to be done to kick-start the economy. But nobody knows what exactly should be done. The corporate tax rate cut in September was one such step. The other step to boost the economy could be to give more money in the hands of the people. For that we should expect something in the budget. But at the same time, I don't know how long the resetting of the operating system will take. And that is going to be very painful for many businesses. So we will bounce back, but that will not happen in a hurry.

So would it be right for us to say that the growth story of India is intact?
Dhirendra: The growth story of India is intact. You have the consumer base. We are doing the right thing. We are actually bringing in meritocracy in business and this will have a lasting impact. And we just might be getting closer to realizing the potential of having a huge captive market. And then we can go about conquering the world.

And given the kind of incentive system being built for companies, we can actually look forward to genuine, credible Indian multinationals coming up in the next 10 to 15 years. This will have its own rewards. This could be very optimistic thinking, but I think the variables which have to be nicely in place, they have fallen in place. Investors just need a very clear-headed approach.

Despite the cyclicality of the economy, the market has steadily gone up. If you look at the long-term direction of the market, it has just gone up despite the turbulence, whether it be a bad monsoon, a global credit crisis, our own banking crisis or the opening up of a sector to foreign competition. Pick any five-to-seven-year period, you will see the market has only gone up. The general direction has been only up.

So what should existing investors do in the current scenario?
Dhirendra: We almost sound like a stuck record by repeating this every time. But keep calm and carry on. You have absolutely no control on any of the things that are happening. And the control that you have is on your will. You will have the best understanding of your timeframes and when are you likely to need the money. So in that context, just focus on what you can control.

If you are investing for the long term, be methodical and diversify. Don't time the market. Don't negotiate on the fundamental principle of diversification. Some people move between market segments on the basis of their previous year's performance. Large caps did well last year and prior to that small caps were doing well. Don't even do that. Just stick to a multi-cap fund. Make sure that you are evenly spread. Make sure that you are investing for five years and more. Make sure that you are regular. Make sure that you're not borrowing money to invest in equity. So if you have these variables in place, I think you will be one of the biggest beneficiaries of the downturn that we are witnessing.

Since the budget is round the corner, do you think there would be some impetus for the economy?
Dhirendra: I think so. But nowadays, the budget is not a very important event or a milestone. Earlier we used to look forward to the budget because everything would happen only on the budget date. But that is not the case any longer. Today you have a GST Council meeting happening every month. You have this big announcement that came in September about the corporate tax rate with a retrospective effect. A lot of fundamental non-financial things actually happened during the course of the year. If the government has to take a stand and make a policy change, it happens without waiting for the budget. So in that sense, the budget is no longer that relevant.

But yes, how much money it is getting, how much money it is spending, what is the spending plan, all these things are very important and I am looking forward to it.

What about investors who are on the verge of investing or are planning to invest? What should they do? Should they wait?
Dhirendra: No. Waiting is a loser's game. What happens is, if you look at any 10-year return, a good part of the return actually happens in some 30-to-40-day period. Markets go up when you least expect it. And basically you have to remain invested for nine years eleven months to benefit from those 30 days. Because no one knows when those 30 days will come.

Start investing and ignore the noise. It is human behavior that the moment you start, you start looking at it very closely every day. And that is actually a loser's game. You have to work hard to ignore it.

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