India Insight

Days of darkness during Diwali?

October 27, 2008

Diwali, the festival of lights, is here but do we see a pall of gloom with the BSE Sensex crashing more than 50 percent since January 2008?

Things have come to such a pass that some people have simply stopped looking at their portfolios. They think it’s too late now to cut losses.

“I have now lost faith in long-term investment, I wish I had booked profits in January when my portfolio had doubled,” says my friend Vikrant, who works for a leading business newspaper in New Delhi.

The tumble over the past 8-9 months had forced Vikrant to postpone plans to buy a new car, and when he finally bought one, he preferred a loan from his father rather than a bank loan at 14 per cent.

When I joined college, many had warned me to stay away from the stock market calling it a dangerous place, thanks to the scams by Harshad Mehta and Ketan Parekh.

I agreed then, although more out of respect, and I was more than willing to dump such talk along with my boring History textbooks.

But the events of 2008, with the credit contagion spreading to stock markets across the globe, have made me sit up and take notice.

January 2008 when the BSE Sensex scaled a peak of 21K seems a distant mirage. Just as the investors and the Indian media were eyeing 25,000 as the next target, the benchmark index has plunged to sub-9000 levels in less than 10 months (197 trading sessions to be precise) — something many of us never imagined. At least I didn’t.

“It is extremely risky to work in this sector now, the company is losing business everyday as investors are panicking,” said a sales specialist at a Delhi stock brokerage who did not want to be identified.

He is looking for a new job, this time in a different sector, after seeing the firm’s cost-cutting initiative render his colleague jobless.

But is the crash affecting life beyond the Sensex?

During the weekend, local shopping malls and markets which are usually chock-a-block with customers completing their Diwali shopping have seen less business as the urban Indian is spending less.

“The middle-class consumer is in a bad shape; nobody is in a festive mood to celebrate and buy gifts,” said Deepak Gupta, a gift shop owner in Delhi.

Gupta says he has lost around 60 percent of his Diwali business this year due to the market crash.

For his part, Gupta, has switched from costlier dry fruits to a comparatively cheaper option of a regular pack of sweets as gifts to friends.

The Bombay stock exchange opens for an hour every Diwali. Records show that the Sensex has slipped only once (2007) in the last three years during this special session.

Given the current negative sentiment in the markets, I wonder how our benchmark index will behave on Diwali.

With each passing day it’s getting tougher to guess the bottom, and for those who have heavily invested, the phrase ‘stock market’ is no less than a nightmare.

But what we should do?

We always knew losses are a part of this game, and hence, we can only be patient and learn from our mistakes.

Remember, there is hardly anyone the market has spared, and maybe you can try to take a break from checking your portfolios during this festive season.

If you are invested or are currently buying in this market, this tip from investment guru Warren Buffet might come in handy — “I never attempt to make money on the stock market. I buy on the assumption that they could close the market the next day and not reopen it for five years.”

I just hope things get better in the next five years. Actually, I can only hope. What about you?

Comments
16 comments so far | RSS Comments RSS

This Diwali has mixed feelings for Indians. The stock market is crashing every day with few exceptions.
Team India is euphoric after crushing Australia.
Chandrayaan is good news.
Vishwanath Anand is poised to retain his title.

 

Don’t trust the stock markets. Just put your money in FD. You won’t regret it.

Posted by Natasha | Report as abusive
 

I still remember an anecdote that a man used to sell samosas on a busy street in Mumbai. He was an illiterate man, but was happy and was making decent earnings from sales. He sent his son to school. The boy studied economics and one day told his father that the economy was in recession, people will lose jobs etc etc. His dad thought the son must be right. And he started compromising on the quality. The customers did not like it and the sales dropped. The old man admired his son as he had already warned him of the impending danger.
We all are like that old man. It is not the end of the world. We are just reacting to some situations. Just sit back and think!!!! Is it the end of the world?

Posted by R S | Report as abusive
 

The Sensex is making no sense. Support levels are getting broken by day as investors sell and flee.

Posted by madhu | Report as abusive
 

A well written piece. A lot of people, however, who are not directly affected by the so called ‘negative sentiments’ or recession have taken to frugality in the wake of widespread gloom elsewhere in the world. Now that goes contrary to the dire need this moment – that of spending – to keep the economy healthy. As for stocks, I think you said it right….the key is to have patience.

Posted by Sonal | Report as abusive
 

Indian Stock Market is close to bottoming out as far as NSE or BSE Sensex is concerned.

Now it could dip max another 10% from here.

For an investor (read as long term investor) my suggestion would be to put 20% of the amount that he/she is looking to invest in the market.

As far as time bottoming is concerned, the market should be rangebound in the 10% bracket from here for a quarter or so.

However, do not invest in Gold. It would topple down to Rs 11500 and Rs 10500 by Dec

Cheers
http://www.vjondalalstreet.com
http://blog.vjondalalstreet.com

 

” Stock market affects only 2% of population in India”
This is a statement made in Parliment recently by Govt.

When the market was going up and shares were at a ridiculous prices no body complained that market was being manipulated. In fact today many companies are
planning to file criminal complaint to police and also ask sebi to investigate people who have spread rumors bringing down the price. Then why not investigate the same companies climb up in share prices before this crash ??? who was responsible for this ???

So pray why so much hoohaa is being made in media and market? remember the saying ” If you live by a Sword , you die by a Sword ”

I think Govt should leave this market to its own fate.
Instead it should concentrate on so many other TOP PRIORITY projects instead of spending so much of valuable time and energy on the market which affects only 2% of the Population . As per the saying if this 2% lived by sword, they can also die by sword. It is is not going to make any difference to 98% of the population .That is Democracy. Rule of Majority.

Posted by Manish | Report as abusive
 

Haha, this post reminds me of the SouthPark episode where Christman was not what it used to be with people deciding to celebrate it with love and friends instead of buying gifts. Commercialisation was sucked out of the festival and all kids were sad.

So yeah, what has Diwali got to do with malls again?

Posted by Nikhil Sharma | Report as abusive
 

Nothing works and nobody can predict whats going to happen, even market analyst’s are clueless as technicals makes no sense at this time but what remains with you is you “faith” and if I remember correctly there was this line in a movie which suits the situation just right
“Picture abhi baki hai dost”

Cheers !!

Posted by Kshitij | Report as abusive
 

For the life of me, I find most of this hype, unreasonable and ill-directed.

Unreasonable, because as this friend of mine rightly said, this ‘downturn’ gives us only the correct sentiment (about how the industry is doing), but it gives us the wrong magnitude. i.e. the fact that the industry is going through a downturn is true, but is it at a third of its performance from a few months back (21000 -> 7000) ? Almost certainly not… Its just panic, and a correction (upwards) is bound to come.

Ill-directed, because, although a lot of people are quite obviously affected by it (now that we are in this mess), I think everyone that should have been affected, should have been only ‘indirectly’. Indirectly for e.g. through inflation, through price-rise etc… But most of the worries that I see around me, are from people who invested heavily into stocks (without knowing the slightest bit about why and when) and now are brooding over spilt milk. To them my response is that, on a sane day, most sane people never venture out into territories that they don’t know about. After all no one goes to a computer shop and buys computer parts to assemble them at home (at least most dont), even if its cheaper by a few thousand. They let a technician (or Dell or HP) do that. Then why did everyone jump in to buy Suzlon ? What was so bad with sticking with traditional methods of investment (including MFs) ? Although interest-rates for most investments took a beating, but at least you have the solace that its fractional and unavoidable.

Robins Tharakan

Posted by Robins Tharakan | Report as abusive
 

Why balme it on the recession?
I will give you a recent experience I had at a local shop. I had purchased a dress for my one year old kid in the month of Sept for his birthday. It was a good bargain(At least I think so) as we paid Rs390/-.
We went to the shop again for Diwali purchase. We spotted the similar dress in different color. The dress was selected. The real surprise came to me at the cash counter as I was asked to pay Rs750 for the same dress which I had purchased for Rs390 a month back.
No logical answer was available with the shopkeeper except to say that I have not sold any dress for such a low price.
So who is encouraging recession? As posted by R S the buisness community is to be blamed who try to make big gains with small investments.

Posted by sushil | Report as abusive
 

Has anyone evr bothered to find out the maximum number of Indians at any given time who are invested in the Share Market? To my hazard, less than the number of Income Tax Payees is the number of Share Investors. Many of them have fairly well spread investments, which includeTreasury Bonds. Preferential shares, Debentures etc. which do not fluctuate violentlyad earn steady returns,generally higher than Fixed Deposit rates. Then there are a few who stay invested for long term and are not perturbrd by the games on the Bourse. The Institutional Investors (including foreign ones ) are the ones who hold the large volumes of shares and they do their shadow boxing in the rings, and gain or loose some money.The index may appear to have lost money. what is lost is not the real money , but the Paer value aritficially propped up by the Psychological pressure. Companies whose shares have been seen tio have lost value at the Exchange haven;t lost a Paisa of their real worth. Therefore, after a few days, the Exchange will reflect the true value. Right now, there is enough real steam left for the Index to be back at 14,000 or so. The rest was Hydrogen Gas and it is good shedding

Posted by C.S.Radhakrishnan | Report as abusive
 

Every thing is right but its not only stock market which crash will hit our economy entirly. I am fully hope we will come out from this Strom till than Happy Diwali..

 

Put your money in socks and then place the socks at the bottom of the drawer and lock it. Your cash will be safe for many years.

Posted by Marmaduke Soddy | Report as abusive
 

it is just a hype created about the recession.it is just a part of the business and/or economic cycles… everything that goes up has to come down as it is said… so is the situation and the market.

Posted by priyanka redkar | Report as abusive
 

India saw huge increase in the number of magazine, dailies, websites and television channels both in english and regional languages in the past two years i.e. 2006 and 7. The hype created by these people led to false promises by sellers of financial products who togehter with media convinced small minority of retail investors that funds and stocks are one way bet… lessons learned… time to forget and forgive… move on… Hope Indians view dalal street like their neighbourhood kirana shop or mandi where one goes only to buy what one needs as per a list prepared beforehand at prices that one expects…

 

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