several investors worry whether the optimism of the 20037 period will return the hope about emerging as the next big economic miracle has been replaced by despair everything that seemed to be a good thing feels like a burden now investors refuse to see some of the issues as cyclical and agree that a downturn will unleash the very factors that shall take the economy back to an up cycle the reluctance to build economic cycles into an investment strategy comes from a dominance of structural factors that have influenced returns for a long time economic cycles represent the correction of excesses that take place over periods of time during an up cycle there is an overall optimism economic activity expands with assumptions about revenues costs and profits riding on growing consumption and demand inevitably these assumptions tend to be too sanguine to convert into reality over sustained long periods the up cycle collapses and businesses soon reach the bottom trying to protect against failure while cutting investment and costs and looking for demand for their products and services the investors in emerging markets such as india take time to align their portfolio strategies with economic cycles this is because a dominant number of structural factors influence their returns sometimes overshadowing the logic of economic cycles the real estate market in india is structurally insulated from the developments in the economy by a blanket of black money it is a parallel asset market funded at high rates by cash used dominantly by investors who want to acquire and hoard the asset several of these people are not impacted by the interest rates set by the rbi the tax regime the processes of the banking system or the rules of law when such an asset defies the laws of the economic cycle it begins to attract ordinary investors who see it as a safe haven during difficult times the problem with this approach is that the real estate market may not remain insulated completely if the money being invested here is sought for other purposes or if the players have stretched themselves by overestimating the demand the cyclical factors inevitably come into play perhaps with a lag small investors in real estate hope for the structural inefficiencies in this market to continue forever and that is the risk they take leaning on structural factors does have its advantages it is a tough long road to correct structural imbalances and problems and every policy correction offers investors the opportunity to make abnormal profits the first large set of retail investors in equity in the 1970s came from investing in the ipos of multinationals these were share sales by bluechip companies which were mandated to reduce the stake of foreign parents and offer shares to the indian public at a price decided by a government agency subscriptions to these ipos made several small investors very rich this was a structural gain what this triggered however was the tendency of companies to go public