As Indian team prepares to play South Africa in the first match of Cricket World Cup 2019, I remembered a match between the two countries during the tournament (CWC 2011) when we lifted the Cup – yes, when

“crown cricket ka madam jee hum le gaye the“. 

Here is an account of the match from the eyes of a student of investing!

The cricket world cup match between India and South Africa played on 29th March 2011 was more dramatic than many movies, television serials or even the television reality showsJ. The Indian batting reminded one of the stock market volatility. What happened in that match has been discussed a lot. We will look at another perspective. It is about how we think and act, how we perceive risk and how we become aggressive when things seem to be easier.

Indian batting was on a song in the first 37 overs and cruising at more than 6.5 runs per over. Then India opted for the batting powerplay. Later in the post-match interview, M S Dhoni mentioned that this was the turning point in the match. What happened in this powerplay and afterwards was as if a massive earthquake called Dale Steyn struck the very strong Indian batting line up.

Let us keep the emotions at bay and analyse the batting display by the Indian batsmen. Before the batting powerplay, Sachin and Gambhir were scoring at a decent pace and we all had raised our expectations of the final score. Probably the team had also started dreaming about a score of over 350. That is why the team decided to take the powerplay and press the accelerator. This is where we will look at the risk and the perception of the same.

Even when the runs were coming at a decent pace, once we took powerplay, both Sachin and Gambhir tried to be adventurous. Pathan, Yuvi and others also followed – not just back in pavilion but in playing rash shots. It was assumed that the powerplay would allow one to accelerate, but it was forgotten that it was the field restriction that was changing and not the quality of the bowling. The run rate could have gone up had the batsmen placed the ball in gaps and got boundaries as the outfield was very fast. Instead, the batsmen started playing riskier shots. Instead of considering that South Africa had a very strong bowling attack, the batsmen considered that in powerplay, the score can be increased and hence the shot selection resulted in the collapse of the strongest batting line up.

This happens very often in our lives. Just because one starts feeling better and positive, one starts to take more and often unnecessary risks. We start searching for the reasons and as it happened in this particular match, people would start questioning if giving the ball to Ashish Nehra was the right decision. In fact, by that time, we had already lost the plot and we could only hope to win given our fragile bowling strength – well this word “strength” did not go well with our bowling then.

This is typical human psychology. We have seen this so often. After every stock market rally, investors at large tend to seek more risk only to realise that the basic principles of investing were forgotten. Eventually, when the rally stops, many investors end up losing. This happened in mid-cap and small-cap stocks in 2017-18, and it happened in credit risk funds in 2018-19. It has happened in gold, in real estate, and in cryptocurrencies. It just keeps repeating itself. This is not about any investment avenue, or any investment vehicle; this is about the investor, and the investor’s perception of risk.

Leon Levy has said in his book, “The Mind of Wall Street”, “The risk is often at its lowest when it is perceived to be the highest and the highest when it is perceived to be at the lowest.”

Benjamin Graham, the guru of investing, has also said in the context of investing, “the chief losses to investors come from the purchase of low-quality securities at times of favorable business conditions.”