Yesterday the BSE sensex took a nose dive. Banks and rate sensitive businesses took a huge beating. I think the markets are presenting an opportunity to buy some quality stocks at attractive prices. Like a sale on your favourite Levis jeans.
Is it alarming? No. The level of sensex or Nifty is not too alarming. 5500 for Nifty !! Weren’t all the experts saying that is the level, so why this brouhaha? I am not worried about the sensex but about the state of economy and the nation. They are both interlinked.
We have policies which encourage black money generation. The same black money is routed into gold which is the main cause of higher CAD. The black money goes into Swiss bank accounts, making the owners happy when the Rs depreciates. Imagine someone who took a bribe of a 100 crore in let’s say 2004. He converted this money into dollars @46 (that’s what the rate on 15 Aug 2004 was). So, it was USD 2.145million which was deposited. Today if reconverted it would be Rs 133crores. Not bad, eh ! Nice appreciation in corruption too.
The cost of corruption makes Indian goods uncompetitive as the manufacturer passes of the price of corruption to the consumer. The whole paralysis of governmental structure and the nexus of politician-bureaucrat leads to an environment where unscrupulous businessmen thrive. So, the more we seem to change, the more we remain where we were. From license-quota-permit raj we have graduated to a Sanctions and Reservations raj. But have things changed? Hardly. Unless we address the macro issues, I am afraid, India as a nation may be moving towards “junk-status” rating by international rating agencies, if that happens , God save Indian stock markets. Retail investors are already sitting out from the markets and FIIs will flee like rats from a sinking ship with all their monies. We could see a fall of another 2000 points on the sensex, if that happens.
For prudent long term investors in equities, do not be worried or disheartened, there are enough good businesses still making profits and growing. Sift in a haystack, find a needle. Making money was never easy.