IF YOU ARE FED UP WITH STOCK MARKETS, YOU ARE NOT THE ONLY ONE

I have been investing in Indian stock markets for the past 22 years. And I guess I am getting exasperated. What with all the behavioural economics, Charlie Mungers, Ben Grahams, Kahnemans of the world. I even do not mind eating crow and accepting that may be I was wrong in terms of Gold as an investment. Manmohan Baba and  his band of 40 thieves have brought me to this brink.  Where does the problem actually lie?The fountainhead of all ills of India lie in its corrupt governance. Let us take the stock markets. Recently there was a crisis in the NSEL. The NSEL advisors had all been associated with the government. The Chairman was a career politician Mr Shankarlal Guru. This stock exchange has gobbled up crores of rupees of investors. What does the government do? Nothing. What does the investor do? He moans on his losses and decides never to come back to the stock exchange for anything. Every time, he is left holding the can.

And that is a recurring pattern in India. Indians save approximately 30% of their incomes i.e close to $500 Billion. And most of this (approx 75%) remains in banks. Hardly a trickle comes to the stock markets. We have a current account deficit because India saves but the Indian Government only spends. And spends more than it earns.

We pay in dollars for what we import which is for raw materials of various kinds. We also get investments in money markets and stock markets through foreign investors which are to the tune of  $10 to 20 billion dollars at the most. These dollars get converted to Rupees to buy the shares or bonds. When they get converted they are selling dollars and buying rupees. As a result, the rupee appreciates against the dollar. We consume the products and the company which makes these products, if it is a foreign company, takes its profit to its banker, converts the same into dollars (this time it sells rupee and buys dollars) and takes it to its parent country. So all of you who consume a lot of Cocacola, Pepsi, Castrol Lubricants, please understand, the profits are reinvested very little back in India and taken out in a huge chunk. But for that we can’t blame the business or the product. Why didn’t a nation of 120 crore people innovate and produce products which are world class so that Indian consumer buys a Cinthol soap instead of a Lux or buys a Kaya Moisturiser instead of a L’oreal ? The answer lies in the policies of the government and how we operate. Short term gains always. No clear cut long term policy.

The investors from Mauritius and abroad, some of them are questionable and what one reads is that a lot of it is Indian black money getting rerouted into India through various tax heavens, comes gradually. But when it exits, it exits in a jiffy. As a result, everyone wants to convert their rupees into dollars, a sudden surge of demand for the dollars takes its price skyhigh, screwing up the whole economy. The balancing act can be done by the Indian Aam Aadmi or the Mango Man. What is $20 billion against his savings of $500 Billion ! It is peanuts. But the government has made no effort to boost the confidence of the common Indian to invest in the stock markets so that it can act as a countervailing force when faced with this sudden exodus. The common man runs to Fixed Deposits and Gold after every such crisis. And can he be blamed for it? 

This story is going to get repeated again and again. Look at Indian stocks. Generally in the last three years they have not given any returns to the investor. No SIP in mutual funds has given any returns. They can’t if the economy stays like this. 

I have been time and again emphasizing that stock market investments are for people who think long term is a minimum of ten years. They are for people who want to get returns more than inflation. They are for people with fortitude and patience. In the last three years also there are ample stocks which have given fairly decent returns. Some of them are in my past recommendations itself.

But as someone has said, Investment is an act of faith. I invest because I have a faith in the person to whom I give that money or in the asset class in which I invest. As I write this TimesNow has broken a story on Thorium theft of 60 Lakh Crores or approx $1 Trillion. Please compare this figure to our GDP which is $1.8 Trillion. If you just add the 2G Scam and CoalGate to it,  you will have the scam total of $1.8 Trillion.  Jai Ho!  Yeh mera India. Dhritrashtra and his thieves steal one years gross domestic production of 120 crore Indians in one tenure. And then they ensure that RTI is not applicable to their parties and convicted people can keep standing for elections. They have not done anything to get the global investor’s faith into India. Why should the common Indian or the common John Doe invest in India.  Time to may be look at relocation options ex India for the honest Mango Man with means. Change your destiny. Either get 545 honest Indians to the Parliament or get  out.