2008 has been the worst possible year for Indian equity investors. I don't think in any other year in the history our investors would have struggled like this. There is no convincing reason for the rally towards south though there are many small reasons jointly contributing this. Those who are superstitious keep cursing the new bronze bull statue installed in Bombay Stock Exchange. But those who are somewhat knowledgeable, thrash P.C and his activities.
When the market was tumbling at its best, the free-bee budget released by P.C and Co has taken its toll on the investors. Now when market was trying to revive its lost position, inflation and imbalance nuke deal have taken it to far deeper into the grounds. With the prevailing circumstances, excavation of indices will take ages. Adding fuel to the fire, USD keeps appreciating against Rupee like never before. From 38.5 to 43 it took less than 45 days. How could this be possible? It is possible when RBI buys billions and billions of dollars from global market appreciating its value.
This inflation caused by the fuel price hike was avoidable to certain extent. As we all know, the crude oil transaction with middle east countries happen in USDs and only in USDs. Before this fuel price hike, RBI has acquired 8.14 billion USDs in 2005-2006, 26.82 billion USDs in 2006-2007 and 78.20 billion USDs in 2007-2008 respectively ensuring USD never falls. But what was the need? God Only Knows. By 31.3.2008, the USD availability with RBI was 299.23 billion. If we would have spent a portion of it to buy crude oil barrels rather than buying few more billions of dollars, it would have enabled our government to think thrice about fuel price hike. And it would have avoided INR depreciation to some extent.
Knowing all these, why did RBI and FM keep buying USDs? Because, if Rupee appreciates, all export businesses will get affected; Foreign investments will get reduced; and as an investor, you must know the aftermaths of reduction in foreign investments. In one sense, globalization, FDI and FIIs are good for a country. But in other sense, the decisions taken by RBI and FM have debilitated country's economy with bloating inflation and suffering middle and lower class people.
Its a double toll for me. Appreciating USD is causing problem in paying my fee and related things for higher studies. Declining indices never allow me to take my money out of market.
Unlike the beginning of this year, nobody wants stock market to scale greater altitudes. They just want it to recover if not fall more. So, when will the market recover? Again, GOK...keep your fingers crossed for another few years...
PS: Thanks to Thuglak for all the statistics
Monday, 30 June 2008
Bloodbath continues at Dalal Street :(
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4 comments:
Economics is a funny subject mate .. there can be many theories ...
If USD falls, exports fall along as well ... so anything can be justified. And as they say, "when US sneezes, the world catches cold". The recession in US could have this multiplier effect in here.
Stocks are not going to keep falling. There is a saturation point for anything. You will make money when it comes back up again ... however short term investors will lose it for sure. Investments should be thought of as long term, anyways.
All said, people also say "there is your theory, my theory and the truth!". So, will leave it as it is :)
Smiles,
Vinayak
Yes. I accept. But then it need not as worse as the current position. I sincerely feel that the government should have done something about this.
//Stocks are not going to keep falling. There is a saturation point for anything.//
Seems it has crossed all saturation points and its a free flow. We may see 4 digit Sensex if it goes like this.
//You will make money when it comes back up again//
Ha ha ha...with that hope only I am waiting and waiting and waiting...
Yeah, your position is pretty bad; that is, not a great time if you want to realize something out of your investment.
People make lots of money even when stocks are falling ... i.e. you might have heard of short-selling and the likes. So, when it falls, the bears would want to keep it falling to cash in on as much as they can. Then the bulls take their turn ... The history of the stock market has always been a sine curve. Waise, even this plunge was on the expected lines in my opinion. It was growing beyond its potential ... and now nosediving.
Even our investment has reduced to about 50% in value. But yes, the lock in is around 3 years and I am asking my father to keep it for its full term of 10. Lets hope together (we are on the same boat) that the history repeats and the curve will someday reverse!
Smiles,
Vinayak
In fact most of my stocks have returned back to their original price I bought 3 years ago :(
And needless to tell about the ones I bought recently...I am in deep red. And I need to have another 3 years lock-in to see some profits...
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