Stock Mkts or Shock Mkts ?

I, like Ankur was bewildered to see the steep rise in the market indices in India. The fundamentals are still the same but the valuations are haywire.

The Nse fell today on opening and how – a straight downward circuit of 10% on the much belated announcement of seeking views on restricting derivative PN flows. It did however recover after some right noises from the FM , and some purchases by Lic and others later in the day. The Bjp and the new opposing supporters CPM is demanding a JPC on the whole circus.

Ajay the free mkts proponent explains the whole game that puts the whole argument in context. Its not about the Pnotes after all it is the Capital Account controls.

The announcement in the long to medium term is a positive development nonetheless but will give pain in the short term when the market has gotten illegally irrationally exuberant. This thanks very strong flow of hot n cold dollar coming in from the west, partially due to the continuous fall in the dollars value resulting in rupee gaining strength.

The Indian stock markets are under owned by many Indians. This being my personal opinion stems from the fact that most middle class Indians still prefer the safe FD route and hardly any of the rural population has access to the equity markets. Things are surely changing no doubt, but it will take time for India to compare with Usa where even a barber and a masseuse have a portfolio or a mutual fund investment with Vanguard or Templeton . The Sebi powers are weak, insider info sharing is rampant, fines are negligible and the small investor is always the last to know and his interests are seldom looked after.

There is definitely fear in the minds of people and the most important thing is to not panic, though the fear is not unfounded if you look into the history of the markets.

Sucheta Dalal has time and again exposed the scams, and it is not difficult to sum up the fact that Govt interferes in Psus, Autonomous bodies, and markets while politicians run Psu firms like their personal fiefdoms.

People still remember the UTI mess, the Ifci Idbi Nabard mess .. list will go on.The scamsters are almost always in league with either the politicians or bureaucrats and even after the endless scams and the endless jpcs and gazillion inquiries no real punitive action is ever taken.

Look at UTI 64, a trust fund in the guise of a mf whose Trustees were untrustworthy and were in league with pvt fund managers and corporates instead of them looking after investor interests. Why wouldn’t they if past precedent meant that the rules could be broken – like investing in companies recommended by politicians of political party s or for Psu disinvestment at high prices. Net net the small investor suffered thanks to the unilaterally imposed governmental package and smart decision of implimenting STT by the current fm to simply force a write off of the capital loss suffered by most unit holders.

Read 10 years of scams,
Sucheta on KP
and Sucheta on tehelkas backers

So my friends Caveat Emptor still rules our markets.

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4 thoughts on “Stock Mkts or Shock Mkts ?

  1. The stock market is getting more difficult to read by the day because now the international players have a big part to play. Apparently a lot of dollar inflow caused the markets to rise…

  2. I am very afraid when market rises due to forex inflow… makes it ultra volatile and more susceptible to damages caused by international events and rumours…. we are still a long way off from building a self reliant sensex… or maybe such a thing doesnt exist….

    hey oemar
    welcome to my blog 🙂

  3. actually i think the influx of FII and foreign investment is good for the nation and benefiting it in a big way.
    1) the increased valuation is encouraging more and more company to raise funds (IPO/FPO) and expand their operations.
    2) since now there r too many players with deep pockets (both domestic and international) its now very hard for speculators to manipulate the market.

    yes and no- what about the hot money the impossible trinity and the political interference and worse the record of the regulator as being weak and helpless ?

  4. Well, the past week or so at least, I saw to my utter surprise that while the world’s stock markets dipped owing to the weak US Dollar and the subprime crisis, the Indian market shot up. I read a very interesting Newsweek article that said that Indian stock market, for certain reasons, will be independent to a large extent, of the world’s downward trend. Mostly because they say our economy is consumption driven.
    So, today, would you advise me to invest for the long term, expecting a Sensex target of 25K??

    we are in unchartered territory , id have said go invest without fear if two things were a certainty
    1. sebi would be an independent body with sufficient teeth and integrity to punish even the biggest business family if it violated rules and as a practice fraudsters would be punished and politicians wouldn’t interfere in the mkts
    2. even ur nurses and peons had a stock and mf portfolio

    The fact is that the world money is moving from the us and coming to young countries like India
    there will be growth but externally dependent and until indians consume (buy) indian stocks with conviction we will be prone to shocks and big spikes and crashes – else things r goin great guns ! 25k or not i cant say but stocks look more than fully valued to me

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