Sensex in 2020

Happy New Year!

Just an interesting observation.....
Sensex in 1990 was 1000 points,
a decade later in year 2000 it touched 6000,
at the end of first decade of the new millenium, the Sensex was 20000,
Year 2020 it should be 50000 plus (thats my prediction)

To List or not to List..

The fact that, India is on the verge of a great Economic boom is well known and acknowledged by the world. If such is the scenario, the future of its Capital Markets can definitely not be bleak. Hence, it brings into cynosure the MII’s like Stock Exchanges, Depositories, Clearing Corporations etc. Business has grown manifold, from a single exchange dealing only in Cash & Forward we now have many exchanges dealing in several segments- Cash/Futures in Equites/Commodities/ Currencies etc, all functioning in a competitive environment and getting the best deal for investors (especially the small investors). From a paltry volume of Rs.500 crores daily, our exchanges now turnover Rs.2,00,000/- crores and the same is expected to grow exponentially.

As the markets expand and deepen, herein, lies the opportunity for the small investors. They should be allowed to participate in this process by way of being allowed to invest in shares of Stock Exchanges viz NSE, BSE, MCX, USE etc. This is possible only if these exchanges are allowed to be listed. This would be no different than investing in Stocks belonging to the PSU basket.

There are misgivings that certain speculative tendencies will emerge and upset the independent working of such institutions/companies. It is noteworthy that there are already enough checks and balances in the system to detect/prevent such occurrences.

While there may be some merit in the argument that profit should not be the sole motive..

There are already examples of listed companies whose profits earned/distributed are regulated viz. Listed Power Companies.

The NSE was founded on the basis of a ‘Model Stock Exchange’. It was formed as

A ‘For Profit’ Corporate entity. It has made Road Shows to investor abroad. This had increased the hope of local small investors that the exchange would be listed some time in the near future giving them an opportunity to invest and be a part of its success.

The BSE & other regional exchanges which were ‘Not for Profit’ , Association of Persons were corporatised into ‘For Profit’ Corporate entities. This sent a signal to the small investors that they would be listed some time in the future.

Internationally, too, the scene is no different. There are several leading exchanges that

Not only self listed but are examples and models of successful running of exchanges and they too play the role of regulating themselves.

Given our strong regulatory system, we should be able to overcome and cope with whatever challenge that may arise. Another issues is raised with respect to “Monitoring Mechanism’ but should the small investor be deprived of this Golden Opportunity to invest just because of lack of forming appropriate mechanisms and it also gives rise to the question that are monitoring mechanisms not already adequate and do the small investors desist from entering a system which is inadequate?

Searching for the Indian Investor

The Sensex is on the verge of touching lower bottoms! (no pun intended) The world seems to be preoccupied with economic problems of its own so much so that they would hardly be interested in the Indian Markets at the moment. Our markets at the moment are 'Emerging" and too minscule, just to put things in perspective, the $700 Billion was the first Bailout package announced by the US government, and a similar package to follow ( now that Mr. Obama is firmly in the drivers seat) is almost twice the total market capitalization of our Sensex. So lets forget the Foreign Institutional Investor (FII's) and Hegde Funds (they are undesirable anyway) and look with in our country and search for the elusive Indian Investor, who is fast disappearing like the Indian Tiger.

What has been the reason for the Indian investors disappearance? Lack of confidence in the Capital Markets beacause of their inability to understand the markets, with no access to proper advise even from brokerage houses (who deemed fit only to promote Futures trading) resulting in complete destruction of whatever little capital the 'Investor' had, little realizing that he became a punter/speculator/gambler and would be better off at the Mahalaxmi Race Course.

Notwithstanding the Global meltdown, current economic slowdown and the Satyam episode, there is a case for Investors to take the plunge. The PE ratios are at an all time low. Even if the markets are to fall another 10-15 % and, if we, believe that we can never enter the markets at the lowest, its about time that the investors start purchasing stocks. The risk reward ratio is clearly favourable at this time with an investment horizon 6-12 months. The economy will still grow at 5.75(IMF estimates) or 7% (Ministry of Finance), which will still be amongst the highest growth rate in world. Much of our economy depend on the monsoons which were reasonably good leading to decent internal consumption, rising prices of Crude, which was a concern, are at comfortable levels and inflation is low. What is needed is stimulus for demand for goods and services. which may be provided by cutting taxes and placing more money in the hands of the people, those people who will not hoard the money but will spend it...meaning the poor sections of the society. If corporate governance (or the lack of it) worries investors then maybe its time to go back to the listed Public Sector Enterprises (PSU's), atleast there you can be reasonably certain that the profits are not misstated or the balance-sheet reliable.

The flavour of the day for investors is preservation of Capital. Hence the alternate investments sought for are Bank Fixed deposits which offer around 10.5-12 % pre tax returns per annum. Agreed that equity investment are risky but it is this very element of risk which yields profit, and to my mind the risks involved at this stage are limited whereas the potential profits could be very handsome. The FII's will come , but only after they've dealt with problems at home, which could take a while. Its about time we start doing what enterprising investors have done - take calculated risks.

Election Season

Its that time of the year, when politicians start showing up a your doorstep, at their humble best and a picture of concern and sincerity. Yes, you guessed it right, its political tamasha time again. The election bells are tolling. 

While a few states decide the future for a motley bunch of candidates it would be interesting to watch as this could be the precursor to the big one in 2009, and perhaps also answer the question when will elections take place and who will be the next PM.

Globally, this has also been the season of 'Change' (remember Obama). So if we were to apply the same logic then brace yourself to greet Behen Mayawati as the next crown princess. Move over Congress , (who is still smarting over the ill effect of rising prices, although your offical inflation figures say otherwise,  you only have to ask any housewife) and  BJP who seems to be caught in a time warp of its own and knows not which direction it is heading towards. Although it may still be voted in for no doing of its own (deja vu ?)

As citizen of this country can we not ask of our political parties to atleast ensure the following least common denominators in our prime ministerial candidates.

1. Indian

2. Sound Mind

3. Minimum Post Graduate

4. Below the age of  60

5. Physical fitness an important attribute

Most Indian Leaders at the time of Indian Independence shared these atrributes!

Welcome to AlokSpeak....

Hello Visitors,

Welcome to AlokSpeak... A place where I shall share my views, thoughts and rumblings. I hope to write as and when time premits and inspiration strikes. I am not a professional writer so do excuses any errors that may occur.

I embark on a journey (of maybe a thousand miles)with this small step....

Alok