Skip to main content

Falling Indian Equity Markets

Warren Buffet once famously said, "Only when the tide goes out do you discover who's been swimming naked". This market correction showed up a lot of people who were swimming naked. i.e, people who were long on stocks or futures with very little knowledge or conviction about the companies they are invested in. For long term investors, a large market correction provides a good time to invest into the market. The market again showed that you can get washed out if you are leveraged. A friend, who started active trading a few months back, was very happily making money before the carnage happened and was telling me about his stock market conquests. I asked him to be careful and he responded saying that he always puts stop losses in place. I still told him to be careful as stop losses does not always do what its meant for. I met him again today and he had lost ALL his capital and is in debt to his broker. So, he now needs to borrow money to pay his broker!!! I asked him what happened to his stop losses. He said they did not work because the stocks were in a downward freeze and there were no buyers. He told me that he wished he had taken my advice to be careful.

Now about the fall in the market, I think there is no reason that the market fell off in the way it did. Looking at the amount of money mutual funds have collected via their NFOs and also the insurance ULIP products that sell the highest in Feb-March period every year, I think there is going to be a significant amount of money that will get invested in the next 2 months for the market to fall off dramatically from here. In fact, without getting into conspiracy theories, the fall may have been orchestrated to enable bigger players to buy into at lower levels with the weaker retail investors panicking and selling off.

So, my suggestion is to buy into companies which you know are doing well and whose business cycle is positive and then wait for the market to move up in the near future. We may be testing new highs sooner than people are expecting.

Comments

Popular posts from this blog

Review: My new ebook reader - Infibeam PI

I bought a new ebook reader. It is the Infibeam PI (www.infibeam.com/PI) . I have seen and used both the Amazon Kindle and Sony ebook reader. The main reason I selected the PI is because it was available in India. I did not have to wait for weeks to get my hands on it.

I will not go into detailed comparisons between the three readers I have used. The reason I bought the ebook is to read books. Although that sounds rather a stupid thing to say, I found some features on Kindle quite superfluous to book reading. Like the space consuming keyboard. I dont know of any book which comes with a keyboard, so why should an ebook come with one. If I have to surf the net, I will use my laptop to do it.

The whole buying process was easy and seamless. Delivery happened within 3 working days. The only regret I had was my father was not there to see this. He was pretty excited with the concept of an ebook reader and I had entrusted him with the duty of checking the condition of the parcel when it arrive…

Book Review: Let's Do Lunch by Roger Wilson

I read this book sometime back as part of my journey of understanding food and how it affects the body and mind. In the last two years I have managed to lose about 10kgs of weight and in the process have learnt a fair deal about food, although not enough to talk authoritatively with a nutritionist.

Roger Wilson's book deals mainly about how the author lost a significant amount of weight himself after trying his own diet plan. The diet he followed was eating fruits and proteins. His lack of fundamental knowledge of nutrition makes his commentary a suspect from the very beginning. This book is more a chronicle of the authors weight loss journey than a guide to healthy eating.


Conclusion: Better to avoid.