Stock Markets were the thing to which investors were sticking to resembling the ad of Fevicol ka Jod, and they are the things from which investors are fleeing away, not unlike the Jackal who runs toward the city on the roar of the lion. I am a novice in the field of investing in markets (not even started as of yet) but regarding the understanding of basic subtleties of investing, I think I have gathered some expertise. I will just try to express my opinion on some of the rumblings going on in the market.
First of all, I would like to tell you all that I watched the movie Gafla yesterday. Though they proclaim the movie as a work of fiction, but I (like many others) was able to relate it to the notorious scam undertaken by Harshad Mehta in 91-92. The movie deals with how a non-entity, with a bookish knowledge of the stock market, was able to corner a position for himself which deflated the wits of many stalwarts. The movie tells us that how “safe and secure” investing can create wealth for you. The movie also illustrates that how the big players controlled the heights of the market. Harshad Mehta was able to keep the evil plans of these investors at bay and boosted the economy using the scrupulous money garnered from HDFC Bank, supposed to be deposited in government securities.
Now, let’s come to the present market situation. The markets are running in a bear phase owing to the pressures from the subprime lending. Because of this, the credit rating of all industries is decreased and a liquidity crunch is eclipsing the markets. Also, the demand of consumer goods has declined owing to the gloomy outlook prevailing in the markets. This has led to a decrease in the borrowings by various firms for their operations, even though Fed has taken steps by reducing the lending rates to 3.5%. Fed is also providing the banks with loans worth billions at very low interest rates for solving the problem of liquidity crunch.
Fed is looking forward to providing each of the borrowers with some fiscal incentive so that they will be able to face the prevailing attitudes and help the markets to regain by spending some amount. And it is because of this speculation that Indian Market has seen a growth of more than 1000 points in the previous 2 days (although Sensex decreased 130 points today). You can see hue and cry from each sector, the zeal with which they are trying to convince the spectator that this is the right time for buying.
But according to me, the small rise in the economy is just spurious (and even reeks of scam 😉 ) and the US markets will further deflate. This will take place due to the further housing crunch, inflation and various other reasons. So according to me the best thing to do now-a-days is to go short, or may be even deal in small intervals and save the dealings for long term investments for the month of May or start of June. Till then adios.