Wednesday, June 07, 2006

Radio FM!

VOLATILITY in the Indian stock markets is mainly due to the shenanigans of FIIs and Mutual Funds. Even our Finance Minister, P. Chidambaram believes this, else why would he have kept harping on television that mutual funds have enough money to absorb any FII exits; and that retail investors who have a long-term view should stay invested, make informed investments, and if they cannot do this, shift to investing in MFs!

Our FM was giving directives to investors about long-term investing, without clarifying what was meant by long-term. After all, India’s fundamentals could change in 5 years, and mutual funds are subject to market risk, and then again, not all of them have performed in poor market conditions.

What would happen if in 2 years we have an election, and a new FM comes along and tinkers with the financial system, for better–or worse–for worse. Would companies attract the same PE despite better fundamentals?

Perhaps this is not for the FM to say, but our dear FM speaks suavely on all occasions except when it is most required. The right thing for him to do was to have quit smiling, and clarify the CBT’s circular on taxing the FIIs, during market hours. Alas, too little was said too late. But he never stopped sheepishly smiling.

That our FM bleats such statements displays how immature we in the Indian stock markets are. You would rarely, if never, hear the Japanese finance minister, or the US Federal Reserve making such childish statements. They talk economy, fiscal deficit, inflation, interest rates and other such indicators. It isn’t that the US and Japanese markets there not driven by emotions; they are, but not by sentiments, and herein lies the difference.


SumanSpeaks said...

Thanks for the article.Ur thoughts that the economic growth indicators could change in the long term is a valid point--as in the long term we are all dead.It is due to FM's zero response during the market hours that triggered such huge fall of more than 800 points on that black Monday.
But I do not agree with u that the stock markets in other parts of globe specially in the US and Japan are not driven by sentiments.
U should know that stock markets all over the world are driven by sentiments and the markets in Japan and the US cannot be an exception.
The dry run in the Indian stock markets will stop after 15 th June, 2006. The final, US Interest Rate picture will come out after 29th June, when Fed will meet and take a review on the interest rate front.
Best wishes,
Suman Mukherjee

Athena Research said...

This is nothing but frustrations coming out. Why do people cursing FM for the wrong they have done to themselves. Is FM responsible for the GREED and FEAR of small investors.

What goes up, falls one Day. Why Should FM save greedy small investors all the time? Me and Only me is responsible for my financial health - No one Else.

"In the Stock market Bulls make money, Bears make money... Bur Pigs always get slaughtered. "

Enjoy the free fall of market, sit back and relax. Make plans, obey simple rules of stock market to recover losses and to make money.

Thanks and Regards,
Amit Trivedi




Consider how the crisis has unfolded over the past eighteen months. The proximate cause is to be found in the housing bubble or more exactly in the excesses of the subprime mortgage market. The longer a double-digit rise in house prices lasted, the more lax the lending practices became. In the end, people could borrow 100 percent of inflated house prices with no money down. Insiders referred to subprime loans as ninja loans—no income, no job, no questions asked. - George Soros in latest book

everything’s going up, there’s a feelgood factor and people tell each other how much their houses are going up at dinner parties,” says Professor Mark Stephens of York University’s Centre for Housing Policy. “Then the music stops, as it always does.”

year, Japan was a more attractive market to put money in. If you look at the US, we can now get an internal rate of return of 25% there, so why would anyone want to come to India?” - a senior executive at an international financial services group, who did not wish to be named.

people told us house prices never go down on a national level, and that there had never been a default of an investment-grade-rated mortgage bond, "Mortgage experts were too caught up." - John Paulson, trader, who bet against subprime market and made $15 billion.

most puzzling are the real-estate projects of Parsvnath. Just have a look at the Pride Asia project near Chandigarh. They are asking almost US $300K-$350 K dollars for 2 bed room apartments. They have Villas in this project that costs more than US $1.5 million dollars. It is true that some people in India have that kind of money in India. However most of their wealth is black money and that can not be used to buy these properties. Obviously, these projects have been launched keeping NRIs in mind. - Sanjeev, comment from another site

Desai, aka Bani, the star of Balalji Telefilms's soap, Kasam Se, has been house hunting for over a year. She had almost closed a 2-BHK deal last year for Rs 1.5 crore in a Oberoi Constructions' building located at Andheri, Mumbai, but when she went back to confirm it, she was asked to cough up Rs 2.61 crore. Since then, she is still house hunting. - Mumbai Mirror


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