Inflation still high, what next? Maybe CRR hike
Kavit Sharma 05 Apr 2008 | : Business News - India, Retail investors, Stock Markets
Inflation numbers (at 7%) are still very much out of RBI’s comfort zone (of 5%) and show no signs of relenting. While the banking system is once again flooded with surplus cash flows, price levels too are rising to newer highs. CRR (Cash reserver ratio) hike seems to be next on the cards. This would help to reduce liquidity in the markets and hopefully in the process, lower inflation rates. Bad news for investors and retailers .. Stock markets may tumble further due to this news and the eventual liquidity crunch. Continue Reading »
Threatening news for freshers: US employers cut 80,000 jobs in March
Kavit Sharma 05 Apr 2008 | : Business News - Global, Business News affecting Freshmen
US employers became jittery by talks of recession and slashed 80,000 jobs in March, the most in five years and the third straight month of losses. At the same time, the national unemployment rate in US rose from 4.8 per cent to 5.1 per cent (the highest in 2 1/2 years), the clearest signal yet that the economy might already be shrinking.
Job losses were widespread in March. Construction, manufacturing, retailing, financial services and various business services all racked up losses. That overwhelmed gains elsewhere, including in education and health care, leisure and hospitality as well as in government. The economy is suffering the effects of a housing collapse, a credit crunch and a financial system in turmoil. Continue Reading »
Retail Investor – Dilemmas & Woes
VK Sharma 05 Apr 2008 | : Expert cues, Retail investors
All human instincts are guided by the greed to earn more in quickest possible time span and various asset classes such as equity, commodities and real estate are the means to achieve such goals. Equity markets are generally a preferred mode because of possibility of investing in small amounts and easy liquidity.
Equity has its own risks and pitfalls made worse by experts, analysts and tippers guided by their own interests in the market and what a particular management would like them to say. Let us take the most recent case — when the market was at approx. 21,000, no one said that the market was over valued or there were excesses in the market. In fact, there were talks of market touching values of 30,000 and above and recommendations based on these projected values made investors pour in more money into the market. Now, all experts say that the market was grossly overvalued and had to correct. The same holds good for the IPO market. A recent case in point is that of Reliance Power. Before the IPO’s closing date, no expert said it was grossly over-priced. In fact, all along premiums of Rs 500 and above were being talked of. Was it for the good of investor or management or some High Net Worth Individuals? The naked fact is that about 70% of IPOs ultimately sell below their issue price for many, many years.
Let us be clear about one thing. The markets, experts, tippers and brokerages thrive on the Retail Investor for their shear numbers and accompanying investing capacity but work for company managements, HNI’s and organized sector of bulk investments which at best could account for 35-40 % of total market value. In every stock market boom, be it Harshad Mehta’s time, Ketan Parekh’s time or the recent one, more than 75% of the retail investors perish but in a nation of 1000 million, a few million newcomers appear after a gap of 2-3 years.
Does it mean that equity should not be considered as a means of earning money. No not at all. But one has to learn take one’s own decisions after considering both the speculative content and fair value appreciation content of the script under consideration. Dealing in equities with higher speculative considerations is a very risky approach and I am sure you would not like to be the unlucky buyer at peak of a boom for your buys may not be the favoured ones in the next up cycle of the sensex and you may end up with 75% erosion of your wealth.
