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Crying, whining investors in India

Posted by abyjain on January 23, 2008

Mathematically if,

DD – domestic demand; FD – foreign demand; SP – stock price

then SP is in equilibrium with DD + FD.

SP = FD + DD (simplistically put)

When FD goes down, SP also has to go down unless DD makes up for it. But of course, we Indians are masters of “follow the leader” and when FD goes down, DD goes down by 1.5 times of FD. So what do we expect? Chidambaram should take care of the SP!!!! Crazy fools I say.

There are tons and tons of articles in the print media and on the TV about how families in Gujarat have been wiped out and how angry protestors outside the BSE were shouting slogans against the finance minister of India. I have a few points to raise to this:

a) When the Indian markets have been going through the roof for the past n number of months, how many of these protestors sent flowers or roses to the finance minister. Of course, none of these jokers was making money in the markets during all these days!! Most of the people I know closely are all still holding positive positions in their portfolios. So I would really like to meet the people who had a bad enough investment strategy to “wipe out their family” due to a correction which takes you back to levels seen just a few months ago.

b) Most sane investors would still have positive positions in the market if they have been investing regularly and not only in the last 6 months. The only real losers in the market today would be people who thought there was a quick and easy way to make money in the equity markets. These people were either leveraged (using money that was not theirs to risk) or foolhardy (jumping in just to make a killing). If these people do not understand that the markets follow a simple risk-reward philosophy then there is no one to be blamed.

c) Most of the stock prices will come back close to their earlier levels sooner or later. Investors who even invested at the lows of 22nd of January have also MADE a lot of money within this correction. The only stocks that will not come back to erstwhile levels are the ones where the most foolish people were treading. You cannot fault the SEBI or the finance ministry for that.

d) There is a lot of comment about how the FIIs come in to India, make money and leave! How crazy is that. If we used our own brains, and instead of selling stocks at moments like these, bought them and then sold them when the FIIs are back, then who would be the one making profit. We don’t lose money cos of the government or the FIIs, we lose it because we are following the FIIs in buying and selling instead of leading them.

I could go on and on, but the moot point is that the India story really is intact. Indian companies really are growing and no consumers income has gone down due to a stock market correction. Since all this demand is continuing to grow, Indian markets will keep growing. I would request our whining friends to stop making a political issue out of a worldwide correction and instead focus their attention on which are the right investment strategies for the future.

Edit:

US and Europe fell again after trading hours in India – Does this mean we’re in for another fall investing opportunity tomorrow?

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One Response to “Crying, whining investors in India”

  1. Its human nature to sit silently and enjoy the fruits when you are happy and to pour our sorrows to all our friends and make them miserable too when we are sad.

    the ones who lost money are the day traders and honestly i have no sympathy for them. During diwali, rediff had an article about thousand of Gujjus buying 3 door fridges, 42 inch plasmas and doing downpayment for the new houses they were buying. Wish they had the gratitude then to thank the FM, SEBI chief and whoever else they would love to blame today.

    Its a freakin heard mentality out there. That’s why only 1 in 100 makes money. Like the saying goes (am not sure of the exact wordings though)

    “when the bears are on the rampage, its the pigs who get slaughtered”.

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