The ancient Egyptians had an early warning system that today’s science can’t dream of. Literally, because the system was the Pharaoh’s dreams! As per the Old Testament, the Pharaoh once dreamt that he was standing by the Nile when seven fat cows came out of the river and began grazing. But then came seven lean cows who ate up the previous seven! Later that night, he had a similar dream, this time involving grains. Joseph interpreted this as a famine lasting seven years, followed by seven years of a bountiful harvest, and advised the Pharaoh to store surplus grain. 

But to be fair, science is getting there. In the 1950s, the mathematician Benoit Mandelbrot was working on minimising noise in communication lines, when he realised that there were two effects at play. The first was continuous and predictable, and the second chaotic and unpredictable.

Mandelbrot called the first the “Joseph effect”, after the Pharaoh’s interpreter. This was broadly true across domains – things largely move in predictable patterns. If you recall what life was like before 2020, that! Until they change abruptly – that’s the second effect, and before we look at it, let’s filter out the noise from the market communications. 

1. Across the world, it rained stimulus packages. The US Congress approved a $900 billion package, and Japan $700 billion. Thanks to the liquidity, and TINA (There Is No Alternative – because, with low repo rates, equity is arguably the only investment option), the markets continued to rally, and the global market capitalisation (total value of all listed stocks in the world) crossed $100 trillion for the first time! Even a mutant virus strain couldn’t dent the enthusiasm! 

2. What else was left unaffected? Interest rates. RBI’s stance is great in terms of capital infusion towards all investment options, but the challenge is keeping inflation in check. The RBI has projected CPI inflation at 6.8 % for Q3 2020-21, and 5.8% in the subsequent quarter and the aim is that demand recovery will revive growth on a durable basis.

3. We’re also cautiously optimistic about demand recovery and the return to normal — airport traffic tripling in Mumbai, CRISIL’s prediction of mutual fund AUM reaching Rs 50 lakh crore by 2025, auto sales recovery, rising oil demand, and the Finance Minister’s promise of a budget like never seen before in 100 years, are all good tidings. India is also gearing up for the vaccine rollout as the UK and US begin the first stages of vaccination. 

The vaccine brings us to the pandemic and the second effect, which Mandelbrot named the Noah effect. You can imagine why! It disrupts everything, just like the Biblical floods. COVID is an example. But while the new normal is nowhere near the normal we knew, it’s now beginning to trend more towards Joseph than Noah. Giving us an opportunity to reflect, plan and prepare. After all, it’s not just the Pharaoh who has dreams! 

2020 was a nightmare, with the pandemic creating a global emergency. But know what, “emergency” originated from the Latin word emergens, a form of emergere, which means “rise up”. And that’s exactly what we should plan to do this year. Here’s wishing you an amazing 2021, a year to get older and if lucky, Pfizer! Thank you for reading.

Indices and benchmarks in December 2020


dec equity benchmarks


dec debt benchmarks