A short note on Volatility

August 5th 2024 was a brutal day for the markets – the fear gauge “VIX index” rose to an intraday high of 65. The last time VIX had seen such levels was in March of 2020. The wall street pundits attribute this exaggerated market reaction to a variety of reasons: the unwinding of the yen carry trade, some link it to the geopolitical tensions in the MiddleEast while some others were of the view that the FED should convene an emergency meeting for 50 bps cut and not wait for their scheduled meeting in September.

Amidst all this drama, I was pleasantly surprised to receive very few reactions or rather overreactions from my limited partners. I am a firm believer that my investors are smart and well educated. This episode has only reinforced this belief. Such a day which would have sounded the death knell for many traders, hedge fund managers and investors, me and my team were steadfastly focused on
what we do best: fine tuning our investment philosophy and stock selection process.

Many investors turned bargain hunters this time around, infusing fresh funds to lap the bargains available on the carefully curated investee companies of the Founders Portfolio. It was very heartening to see the investors take advantage of the volatility and accept it in their stride.

This period of turbulence brought about the perfect jugalbandi – a partnership where you will always find us by your side – guiding, cajoling and encouraging you to help make appropriate and timely decisions.

I totally agree and acknowledge that high volatile periods are scary and depressing especially when we aren’t prepared for it. It’s the preparation, information and courage that will help us navigate the billion dollar journey. Investors focussed on the ebbs and flows of the share price will remain nervous and ill-equipped to weather the storm.

Market corrections are a necessary evil – a mechanism to shrug off temporary players and transfer wealth from the impatient to the patient. Recessions will come and go – there will be periods of low
return or no return but the Sun will shine brighter after the dark of clouds are carried away by the winds of volatility. Congratulations! You are going to be wealthy because you have understood it!

The famous adage “What doesn’t kill you makes you stronger” is perfectly apt for the tumultuous
week that we witnessed. As you read this, the markets have recouped the entire notional loss suffered last week and we are back to pre Manic Monday levels.