TIA Article

Few Words on Market – 090119

 

090119: Let’s start with two quotes, which are appropriate for the current scenario, from two famous personalities.

1. Warren Buffet: “If you expect to continue to purchase stocks throughout your life, you should welcome price declines as a way to add stocks more cheaply to your portfolio.”

2. Shelby Davis: “You make most of your money in a bear market, you just don’t realize it at the time”

Davis has said it to the point. Investors vary of markets at current levels would only realize in future that they missed a great opportunity. We have discussed regularly on the state of Indian and Global economy and its likely effect on our markets. There is pessimism across, many investors are stuck with stocks of higher prices. Investors just do not have any money to take advantage of these cheap valuations, this is a common reason we hear, infact it’s only an excuse to stay away! The fact is even after all the mess in global financial system, there is money available with investors, but majority of them have become risk averse. We all frequently hear about the large sums of money being collected by debt funds, fixed maturity plans and bank fixed deposits. Today’s risk averse investor is choosing these safer products just because he does not want to take chances with equities.

The problem lies not just with the investors, a big chunk of the blame has to be shared by the advisors as well. Though they may be licensed, these half-seasoned advisors are less of advisors and more of product sellers. They were busy selling equity products even to first time entrants in the market at the peak of bull market during the last quarter of 2007, in particular ULIP’s. Actual need of Insurance took a back seat as the agents were busy selling ULIP’s to every kind of investor irrespective of age and there actual needs, promising them a large booty by just paying for three years! Investors need to be educated on the benefits of buying stocks when there’s discount sale going on in the market, like the present one, but many of these agents would not dare pick these policy holders phone calls today, the reasons we all know very well. If you are such an investor who was induced by these lies then, though you can’t recover back the money, it’s high time you change the agent!

The Satyam fiasco has deterred the sentiments further. The momentum the market was building in November and December got punctured and the markets are down again. Though down they are showing ample resilience at around 9000 Sensex levels. Many people are asking why did it happen in India? are our laws weak to avoid such incidents? etc,. United States has stringent laws for financial markets yet they were not able to stop or detect Maddoff scam until it surfaced on its own. There are scoundrels everywhere who would spot some loophole for their self-interest. The government has to now take a tough stand and actions on the issue in order to send a stern warning to similar promoters and to the world that these incidents would no longer be tolerated in India. Westerners sitting in various locations around the world are commenting on Indian corporate image, they have no right to do so when we all are aware how their own companies have been collapsing over last six months.

Nifty though was moving up found selling when the Satyam news broke out. It was mentioned that market is not expected to trade in a range and events like the above automatically keep the gains capped. The support would emerge at 2620 – 2590 as we are already seeing buying interest at every level. Investors are advised to seriously look at Index Mutual Funds to get best possible results out of the range bound market. 

Disclosure:- It is safe to assume that the author may have interest in the sectors recommended in this news letter. Seeking personal advice from your Financial Advisor is recommended before acting on any of the substance given herein. The numbers, figures, etc., presented may have been taken from various sources.

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