The stock market appears to have gone into a mourning for the departure of some foreign institutional investors (FIIs) from the Indian scene. The Indian bourses are suffering from the trauma of separation, even though the same may be temporary. But the Indian trader, ever resilient as he is, will soon learn to get over this trauma. Not only that, I think he already has a game plan drawn up to be executed on the eve of the election.But before I move on, the departure of the FIIs and many broking outfits from the investment banking scene calls for an obituary. You may take solace from the fact that these outfits have quit investment banking not only in India but from all over the globe! But, what does their quitting reveal? They are quitting the field not as a matter of planned strategy but as a damage-controlling exercise. Investment banking calls for rigorous research not only into corporate fortunes, but also assessing country risk. The latter is much easier. This research is only an input to devising theinvestment strategy. And as you now look back in anger, one is rather shocked to discover that these researchers failed to detect the structural weakness in the financial system in the ASEAN countries, as they went about pouring billions. It also makes you sad to see them unashamedly shouting `Eureka' as if they have discovered something new.
Indeed the shouts of `Eureka' from these global managers including the IMF only makes them laughing stock for the Indian investor. For the Indian had been rating their research capabilities highly. And now he knows better. These FIIs, we now know are as fickle, greedy and unsure gamblers as the local trader is. Only they could plough in profits to carry out research. But however deficient he may be in his methods, he has the funds. So he is stronger. But, the Indian investor, I believe will not be cowed down by even a slightly stronger opponent. He only devises newer strategies, as always! UTI, it is believed has already taught a lesson or two in recent times toFIIs; it was a kind of returning the courtesy!
As the nation appears to be headed for one more innings of coalition government, the investor needs to be prepared for more of socialistic trends dictating national policies. That being the case every one will now look forward to the shape and direction of the new government. But let us not bury our heads like the ostrich, until the elections are over. While government policies can rise or lower the pitch of the Sensex, there is always a bottomline. The bottom is more a function of the ball path in which the economy is travelling. And I believe we are not too high up from this bottom, which I put at the Sensex level of 3000. That is the worst case scenario. If that is settled now, let us turn our attention to matter of strategy. With only about two weeks to go for the election results, traders do not have too much time in their hands to dilly dally. Stock investing at any time is a game, and traders would never write off agame player, the FII, who is temporarily reluctant. On the contrary they would entice him! Right now, the US stocks are doing very well what with very impressive third quarter corporate results. But despite that the flow of funds from the American investor into mutual funds for equities has been on low key. Much more money is parked in money market instruments, which later would move into equity funds.
And, what the hell? If the Sensex dips to 3000 you can rest assured every one will rush to swoop down on their picks; that includes the FIIs as well. On that note the investing community can look forward to exciting times, shortly. Permit me to wish you lots of good luck!
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
