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Standing against the crowd - the life of a contrarian investor

Being a Contrarian Investor is a lonely and at times painful occupation, but for those who get it right and stay true to the distance, it can be heavily rewarding, says Ricky Kirpalani of First Water Capital Fund (AIF)

May 01, 2022 / 07:26 AM IST

“If you can keep your head when all about you
Are losing theirs and blaming it on you;
If you can trust yourself when all men doubt you,
But make allowance for their doubting too;
If you can wait and not be tired by waiting.”

While these are the opening lines of Rudyard Kipling’s poem- “If”, they are also some of the characteristics required as a Contrarian Investor. Contrarians by their very name go against the crowd and sometimes against the immediate momentum of the share price. That means that for relatively long periods of time, red can be a prominent colour on your P&L.

Business cycles and market inefficiencies can last for years, and it takes a strong stomach, high-degree of patience and tolerance to pain, plus a deep understanding of intrinsic value to continue buying when the news flow and sentiment are negative. Why would anyone wish to experience this?

It is because during these periods that one can potentially build decent positions at bargain prices and effectively aim to “beat the market”. In the Indian midcap space for much of 2013 till the 2014 General Election and again from 2018 till April 2020, the broad caps were generally in a bear market with nothing much to cheer about. Many of the experts and pundits sang along with the orchestra’s sombre notes.