Smart Investing..

Let’s try to understand what happened in our markets from an average investor’s perspective. If you ask an average investor he would say India as a market was trading at a very high premium till recently and in this kind of scenario everything is dependent on liquidity coming in. That’s right but if we try to understand the psychology of the investors we will find that domestic investors are bit pessimistic about investing at high level while the FIIs or foreign players are not. FII’s pumped in money as they became more confident in the India growth story. Everything was going smoothly and then we heard new words like Credit concerns, Sub prime, yen carry trade, rupee appreciation, yen appreciation etc etc and guess what, though we might not know what all these words mean but still it’s a concern to us so lets not take risk, forget the growth story for some time and lets sell off. Isn’t it what happened in our markets? Who lost?? The average investor err...average trader lost. If he w

The main factors that affected the Indian market this week: In India ECB (External Commercial Borrowings) are capped by the RBI. Any ECB of more than $20 million cannot be remitted to India and has to be kept in foreign currency abroad. This has mainly been done to control the appreciation in the rupee. Ideally the $20 Million is not a very big amount to control the rising rupee but yes it might be a factor for it to slow down a bit. Thats the reason why we had a spike in IT stock prises as they will get the benefit of less appreciation in rupee. Three of the funds of BNP Pariba is being suspended from operations due to a potential crisis in the sub prime lending in the US. Read Article http://kaimalsway.blogspot.com/2007/08/i-guess-its-just-begining-for-subprime.html for more details. Central banks in Europe, Asia and North America have pumped in money to control the situation in the financial markets. The total money pumped in is estimated to be around $300 billion. This is mainly

Sub prime lending i.e. lending to not so credit worthy clients at a premium has again taken a toll on the world markets with European markets going down followed by our own SENSEX as three of the hedge funds of BNP Pariba has been suspended from redemptions. In my last post I was contemplating that more of the hedge funds might collapse which might take a toll on international as well as our market. Indian markets are a part of the emerging markets, which in the total international asset allocation sense are considered risky. Due to this any problem in the international market will attract a sell off here. Fed, which had come up with its policy review on Tuesday, where it has kept all the key rates unchanged, should ideally have understood the graveness of the subprime and had acted upon it. Most of the US markets which opened in the evening our time today is down. Tomorrow it’s a Friday and with all the credit concerns and the subprime our markets might be a bit extra volatile. All sa