This is the mail I wrote on 23rd jan 2008, cautioning people about the grim future of Indian markets...I wish people would have given a serious ear to it.
Recent Fed Interest cuts and its impact:
Last two days as soon as the markets fell and so called analyst came out with the conclusion that the Indian market was overvalued, Fundamentals were not strong and it was just a matter of time and markets had to fall. And when asked what is there for investors “analyst” suggested that now since the fundamentals are same and prices have gone down the market has become lucrative and it is a good time to buy in some stocks which are fundamentally strong. And also FED stepping in and cutting rates by 75 basis points are positive sign and FII’s might again step in into Indian markets and the markets will stabilize and again we’ll see bull running at BSE (although the newly installed bull sculpture outside the BSE is being considered as a bad omen by the traders).
But there are some questions which are still unanswered like:-
Are markets actually fundamentally strong? : A huge response to Reliance Power IPO, the IPO getting subscribed 73X, market capitalization of 2 lacs crore for Anil Ambani’s Reliance power. What does it shows common person’s growing interest in equity markets. NO but mere speculation. Lets see why...
Reliance Power has 5 year plans of adding 7060 MW of power compared to NTPC which is going to add 50,000 MW of power to its current capacity and still NTPC has a market cap of only 2.5 lacs crore, so are the investors going fundamentally strong, no they are just speculating that because of its big name Reliance power is going to sell at high premium and the sole motive is to gain some short term profit, like we can see some recent IPO’s like DLF which opened with a bang are now selling at 15% lower values, and with the year lined up with a series of big IPO’s like SBI, BSNL, NHPC and general elections coming up with state elections in 10 states the future of Indian market is not that bright.
Why FII’s need another boost of 75 basis points cut to again enter the Indian market? What has changed in two days? Why they pulled out money from the Indian market just before the Fed announced the rate cuts? It feels like a fiction only that FII’s were so lucky that they pulled out the money from the Indian markets just before the FED announced the cuts, so that they can re-invest in Indian markets at a lower level, that’s crap. Actually the FII’s are just using the Indian markets like a casino where they can get large(8-11%) short term gains for their investments as compared to US stock markets where the returns are at max 3-4%, that’s the reason why even after ¾ points cut in rates Dow Jones fell by 2.8% and contrary to that Hang Seng, BSE, DAX, opened in green.
Disclaimer: all facts mentioned here are true to my knowledge but should not be used as reference. The writer takes no responsibility for the accuracy of the data ;-)./>_____________________________________________
Subject: RE: Recent Fed interest cuts and its impact
Good discussion topic. Please reply with your thoughts.Hi...fed cuts interest rate in order to move the hedgefunds out of the picture since it is in the market only if there is high interest rates.....so basically fed is tryg to come out of the mortgage crisis and make people who take loans from banks to move from bond market to equity market!!! this is what i have analysed...is it
correct...if so then it should help US equity markets...but how is it beneficial to indian stocks....please reply if you are free