Everyday business channels and news papers are full of articles and statements on stock market movements and fundamental linked to it. I have been following up stock market from more than six years now and I have never been able to figure out the basis of market movement in real sense.
Our market is heavily dependent on western and European world from few years, so our economic fundamentals gets overwritten by sentiment coming from outside world. The situation is such that if we hear a morning news that Dow Jones is down 2%, our Sensex and Nifty would open in red for sure, irrespective of the fact how much impact Dow Jones 2% reduction will have on our economy.
Ever since we allowed FII to jump into Indian Stock market, small investor have been running clueless on market reaction. Hell lot of money flows into India through FII and they take artificially market to the sky with huge fund infusion, they stay invested for few days to weeks and book profit. Since selling happens at very large scale, market falls down and that is the time when they infuse more funds at lower levels. Today's BSE turnover figures shows INR 60,048 Crores (1/1/10 to till date) against DII only INR 19,826 Crores (1/1/10 to till date). So much of money has been invested by FII since 2010 inception and as per my understanding lot of credit goes to FII buying for taking Sensex to 21,000 levels. In this scenario can we say that Stock Market progress is the reflection of our economic progress ?
Everyone is clueless in this kind of market. It is the largest stakeholder who are able to make money and small investor loose money in such scenario.
Let's take this to lower level of market which an Equity Share of a company. There are shares which have doubled and tripled in 2010, when I look at the fundamentals of those companies neither their sales have grown two to three fold nor EBIT. Also all other fundamentals from Company profile, industry profile, product portfolio, Future business strategies to overall financial position, nothing has improved two to three times. In such cases what is the driver of overpricing ? The answer is artificially generated demand and who creates that ? The one who has largest wealth to dominate the market.
Sensex was trading around 17,400 in Dec 2009 month end which is now 19,600 and it touched 21,000 mark couple of weeks back. We can not correlate this evolution with any of factor of our Economic performance be it GDP Growth, Inflation, Employment or anything else.
In such a situation would you be jumping into this market with a hope to get some share of profits ?
Very informative blog about Indian economy! I like it.
ReplyDeleteNice post. They say that if Wall Street even sneezes, Dalal Street catches a cold.
ReplyDelete@ Neneng !! Thanks for parking here
ReplyDelete@ Nandan !! Thats why I thought of sharing my views about it on blog..Thanks for feedback.