impressions on my mind coasting through life's journey...

'The days of easy money are over'

....thus screams the headline of this interview. This CIO of a mutual fund cautions investors that the markets are too volatile for them to venture into on their own but they can do so via a mutual fund and ofcourse keep their horizon long term.

Not long ago, the Indian Stock market was firing on all cylinders with new highs being achieved every other day, prompting even house wives and college students to go out and get a piece of this pie. The logic was that no matter what the stock, it has to rise and they did. Several IPOs oversubscribed, the going had never been so good. There was talk that this was the "beginning of a new era"

Then alas, came the fatal crash. The market fell 20% just within a couple of weeks. Several reasons were attributed, the FIIs were selling off, the Finance Ministry had made untimely comments, the Left parties were seeking increased taxation ... etc.

Swaminathan S Anklesaria Aiyar of the Economic Times makes a point " Economics assumes that human beings are rational. But human reactions to stock market movements are utterly irrational. When markets rise, everybody cheers. When markets crash — as has been the case for two weeks — everybody moans. A hunt for culprits often ensues".

Every one did agree that there was a correction around the corner, but they still kept on, similar to an ostrich with it's head in the sand. A survey of investors suggests that none of their financial advisors ever forbade their clients from investing at such high levels. As the post mortem continues, the IPO market has been affected because the feeling is that there are better deals to be had in the secondary market.

On the brighter side, the economy is growing at a rate of 7-8 %, so its a matter of time before the market recovers. How long will that take is a million dollar (or is it rupee) question?

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1 Responses to “'The days of easy money are over'”

  1. # Anonymous Vinay

    Well regarding the stock markets there is something called a reflective effect which takes place in all walks of life. So when there is a bull phase the market goes up higher than expected and when it falls it falls lower than the bottom expected. This is true even incase of human reactions sometimes otherwise how would one explain the way riots erupt or emotions are evoked. This was one perspective on this. Well regarding your article well written.  

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