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.
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.
So my friends Caveat Emptor still rules our markets.