It was an event waiting to happen. We are seeing the sensex
behaving like an Olympic Games sprinter. It had crossed
the 5000 mark just a little while ago and was hurtling
on all cylinders towards the 6000 mark. The target was
to reach the 6000 mark by 31 December. It happened on
the second of January, late just by two days.
market sentiments, which drives the sensex is 'news' (and
we have been hearing a lot of genuine news, sometime 'planted
good news' and sometimes news based on rumours)
all fodder to the market players.
for the economy, happy days are here again. The monsoons
have done well and so has the economy. India's gross domestic
product (GDP) growth rate, which once upon a time crawled,
is now growing at a robust more than 7 per cent. On New
Year's day, the news was out that the GDP growth for the
second quarter of last year was a stunning 8.4 per cent.
That has set the markets on fire in the last few days.
And it is not just the sensex but also the Nifty, which
is reaching record levels.
far, it has been the foreign institutional investors (FIIs)
who have been investing heavily in recent months. The
FIIs are investing because they see value in the stocks.
If an FII buys a stock at, say, Rs 6,000, it expects the
stock to rise further and reach its full value at, say,
Rs 6,300. At this stage the FII will have no further use
of the stock and will have to perforce sell it.
whom will the FII sell the stock? Other FIIs would have
also perceived that this stock has reached its full value
and will not buy. Here now the chances are that the small
investor can be lured in as the fall guy. And we have
seasoned brokers who can lead these investors into the
honey trap by selling 'feel-good' stories.
you were a broker whose customers' profiles compromises
of guys with average intelligence, this is the story you
will be selling them.
Buddy! Observe! The main reason why our economy is supposed
to do well is the monsoons. And also observe! The record
GDP growth was for the second quarter of last year. The
second quarter ends in September. The monsoons also end
in September and the real effects of the monsoons are
felt after that. Got it? So, it was not the monsoons responsible
for the growth."
beyond your nose buddy," you would have said. "The
sensex has crossed 6000 without getting the stimulus of
the after effects of the monsoons. Can't you see that
it will now cross 7000 by February? This is the time to
sell your wife's necklace and buy."
there are few Doubting Thomases, you would further egg
on: "Look at yesterday's business papers. The headlines
are screaming: 'Exports post 14% growth in Nov; import
surge continues.' The report said: "Further, the
business dailies say: THE country's exports gained renewed
momentum with export growth notching up a two-digit growth
of close to 14 per cent in dollar terms in November 2003,
even as the aggregate export growth during the first eight
months of the current fiscal is hovering around 9 per
cent, three percentage points below the 12 per cent target
now you can fairly expect that the Doubting Thomases left
will be just a handful. You can now sell this line from
a business daily: 'Stock trading interest gathers momentum
in '03'. It read: "2003 saw a sharp surge in traded
value on the National Stock Exchange (NSE) and the Bombay
Stock Exchange (BSE)."
January and December, the traded value on the NSE rose
47 per cent to Rs 9.1 lakh crore, from that registered
in 2002. On the BSE, the value was up 26 per cent to Rs
4.1 lakh crore."
NSE continues to gain market share at the cost of the
BSE. In 2003, the NSE accounted for 69 per cent of the
total traded value, as against 65 per cent recorded in
you see what you are missing out on, Bud? Every Tom, Dick,
Harry and his aunt is into day trading and you are missing
out on the most happening thing of the new century,"
you would say.
I have pledged my wife's necklace to a bank," Thomas
sell your house," you would say.