Tuesday, 9 June 2009

New Government Old Politics

I am writing this after a long time. In the meanwhile as the powers that be changed and exchanged their jobs, me too changed the job (you can find out about it on my profile). The last month has proved it again that as more things change, they remain the same. The Loksabha saw the first skirmish of what was to come in the next five years. DMK and UPA do not seem to see eye to eye on the disinvestment issue. That caused the stock markets to lose 500 point on the sensex and gain 450 points in a matter of two days. Now, was this a predetermined trading strategy is any body's guess.

The Nifty has relentlessly gone up from 2550 pre-elections to 4500 post elections and has made a lot of investors richer. What should one make of this near doubling of the nifty? May I remind you of the October lows (i.e. 2008 October). In the last eight months majority of the front line stocks have posted phenomenal returns, Reliance, SBI, RCOM, Reliance Capital, Reliance Infra, Reliance Industrial Infra, Suzlon, the list goes on...

Has the economic outlook changed so drastically that the despair of the markets has gone and the economic boom is right round the corner? Has the global financial crisis blown over? Does a change in the leadership in Government (in this case no change) make such a difference that people will throng to the stock markets and buy whatever comes their way at whatever the price? We have heard that markets are irrational but are they so irrational that they DOUBLE IN EIGHT MONTHS?

Given these circumstances, we can reach to two conclusions.
1. The markets were artificially brought down and a panic situation was artificially created so that gullible people sold out at lower prices. The economic situation had not worsened at all and everybody was crying WOLF.
2. The economic situation has really worsened and there seems to be hope that things will turn around. This hope has made the markets rebound and get ready for scaling new heights. The worst is over and out and things will be great once again. Our PM also corroborates this statement that India has the capacity to grow at 9% p.a. despite the slowing growth world over.

I would like to leave these question open for discussion...

Please feel free to leave your comments at the end of the blog.

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