That’s all that the markets are seeing. Partly to blame for this are global cues, and partly the growing strength of the Left parties and that the UPA has made all the wrong noises in the past few weeks:
1. Regulation of sugar prices
2. Regulation of cement prices
3. Regulation of prices of around 200 drugs, as opposed to an earlier proposal of 70.
4. The Left’s demand for the re-introduction of the long term capital gains tax and dividend tax, thus hampering investment in the capital markets
5. Growing uncertainty about the quota system
6. Kamal Nath’s proposal of implementing job quotas in private sector enterprises
7. Impending increase in fuel prices, resulting in an overall increase in cost.
To put it simply, the government is planning to increase overall costs and reduce (and regulate) prices that’ll kill profitability, in line with the Left’s thinking that businesses should all be non-profit, and the government should decide what to do with the return on income. Not to forget Nilotpal Basu stating that there should be no family based succession. They want the bureaucracy will wield greater power, and consequently the ministers and MP’s. A step in the wrong direction.
Perhaps some significance can be accorded to the fact that the UPA government has turned two today. This succession of falls doesn’t augur well for the economy. The morbidly negative could see this as an indication of a deflationary trend, and a fall in consumption demand. The RBI increases liquidity and lowers CRR or Bank rates. With the Left weighing in on the government for the pensioners, that’s also highly unlikely.
I’ve been in the market since it was at 3000 levels a four-five years ago. And 300-500 points here or there don’t bother me – I’m in it for the long haul. I don’t believe in “savings” because they don’t take inflation into account, and are not really profitable. In fact, I’ve been quite happy in bearish markets; my first thought is – what should I buy? Still bullish in the long term, I invested in ITC on Friday because I saw it at 300-400 in the next two to three years. Now, with a 1111 point fall and trading stopped, I’m a little sceptical, but I still see it recovering. But a 1000 points is a 1000 points, and it spooked even me for a bit. For me, I’m close to Rs.20 a share in the red with ITC (40+ at one time), though almost everything else is still in the green over the long term. I’ve only bought into companies that I’m comfortable with. Trading requires too much attention, too much time.
The real problem is – the stock markets move more on emotions than logic. And a lot of people would have gotten scalded, and would be looking to take their money out. As they say in hindi – doodh ka jala, chhaachh ko bhi phook phook kar peeta hain (a hindi version of once bitten, twice shy)