Wednesday, May 31, 2006
Indian investors cry foul.
If there is one thing that I have learnt about the markets is that, they are not linear. For the past three years Indian equities have rallied over 300%, the Sensex has risen from 4000 to a little under 13,000. Now that’s breathtaking, of late however conviction in the market has been shaken. Any market participant would tell you signs of a top were there; from funds that invest only to capture IPO pops, to guys in the gym locker room discussing stocks, the signs were clearly there.
I was chatting with an analyst who had recently decided to venture into equity markets our discussion revolved around India’s growth and the equity markets being a reflection of the same. I urged him to take a look at China and try and find an answer as to why the Chinese market is at an 8 year low? China is different he said, “their not a democracy”.
Ah I remembered good ol Jim. Jim Rogers once said Indians are very jealous of China, and rightly so. Indian’s love their democracy, but what good is a democracy that has not really got them anywhere for the past 50 years.
The recent issues with Indian reservations and a famous movie star making a statement which appeared to be quite logical, raises the question about how democratic India truly is.
Back to the analyst, I mentioned to him perhaps this could be the year of consolidation we all talked about, its time to take a breather and reflect back on what has happened in the last 3 years. It didn’t make sense to him, the growth was good! India is a domestic led story! However no market can fend off global shocks. With crude at 70$ a barrel, political instability amongst the oil producing countries and inflation fears, it’s a miracle that volatility didn’t shoot up earlier. It might sound a bit strange but knowing the world is a more volatile place will get me good sleep at night.
Indian investors have to get use to the fact that markets do not go up in forever, every time the markets start to look a little shaky rumors of Political instability and scams surface, on a sad note it’s not their fault almost all of the bull runs in India have ended with a scam. Investors need to understand markets will correct it’s a part of life, markets always come down faster than what they go up, that’s the characteristic of any market.
Investors having been buying on dips for the past 3 years, however I urge them to wait and watch, markets could give away as much as 25%-35% of their gains (they’re already off 15%); the very foundation of the Bull Run will perhaps be questioned, that again would be a great time to buy India, but for now the elephant will take a pause.
I was chatting with an analyst who had recently decided to venture into equity markets our discussion revolved around India’s growth and the equity markets being a reflection of the same. I urged him to take a look at China and try and find an answer as to why the Chinese market is at an 8 year low? China is different he said, “their not a democracy”.
Ah I remembered good ol Jim. Jim Rogers once said Indians are very jealous of China, and rightly so. Indian’s love their democracy, but what good is a democracy that has not really got them anywhere for the past 50 years.
The recent issues with Indian reservations and a famous movie star making a statement which appeared to be quite logical, raises the question about how democratic India truly is.
Back to the analyst, I mentioned to him perhaps this could be the year of consolidation we all talked about, its time to take a breather and reflect back on what has happened in the last 3 years. It didn’t make sense to him, the growth was good! India is a domestic led story! However no market can fend off global shocks. With crude at 70$ a barrel, political instability amongst the oil producing countries and inflation fears, it’s a miracle that volatility didn’t shoot up earlier. It might sound a bit strange but knowing the world is a more volatile place will get me good sleep at night.
Indian investors have to get use to the fact that markets do not go up in forever, every time the markets start to look a little shaky rumors of Political instability and scams surface, on a sad note it’s not their fault almost all of the bull runs in India have ended with a scam. Investors need to understand markets will correct it’s a part of life, markets always come down faster than what they go up, that’s the characteristic of any market.
Investors having been buying on dips for the past 3 years, however I urge them to wait and watch, markets could give away as much as 25%-35% of their gains (they’re already off 15%); the very foundation of the Bull Run will perhaps be questioned, that again would be a great time to buy India, but for now the elephant will take a pause.
