Stop Paying Attention To Indexes

New stock investors tend to pay a lot of attention to the ups and downs of indexes. They soon learn that those may not be reflective of what happens with their own stocks.

- Dhirendra Kumar

Stop paying attention to the indexes – they don't matter to your stocks. While all experienced equity investors eventually reach this conclusion, the realisation comes after some time. It feels quite counter-intuitive. Surely, if everyone talks about the Sensex and the Nifty every day, then they must be the most important thing for investors, isn't it?

Let's look at what has been happening in the equity markets for some weeks now. The freshers' class of equity investors – those who have joined this college within the last two years and of which there is now a large number - has been going through a hard time. The markets have decided to subject them to a hard bout of ragging. Of course, they had stories that all this was bound to happen at some time, but stories are one thing and first-hand experience is quite another.

So, from being a fresher, how does one discover the irrelevance of stock indexes? Here's how that happens. Before you become an investor, all your knowledge of the markets generally comes from the media. Since you are not an investor, all you pay attention to are the headlines. Much of these are obsessed with the indexes specifically, the headline large-cap indexes like the Sensex and the Nifty. Subconsciously, non-investors get this impression that these are important numbers and every day, an investor has a good or a bad day depending on whether the Sensex and the Nifty went up or down.