THE INTERNATIONAL - International Indian

[ INVESTMENT ]
A Historic Year
“Most economists believe we’re in a recession that will last until the end of March. It will
end as soon as people have confidence in their abilities and not the market.”
[ By ArchISMAN DINDA ]
Every year has its vicissitudes, but 2008
will go down in the history books like
no other year. The extreme volatility
witnessed by the Indian bourses cannot be
compared to any other time and the effect of
these swings was felt all over the globe.
It all started with the sub-prime crisis in the
United States. As foreign capital fled, and confidence
evaporated, the emerging world’s stock
markets have plunged (in some cases losing
half their value) and currencies tumbled. The
seizure in the credit market caused havoc, as
foreign banks abruptly stopped lending and
stepped back from even the most basic banking
services, including trade credits. News
poured in about the global banking crisis, and
stocks all over the world started plummeting
and naturally the Indian bourses followed.
Media savvy analysts who used to flaunt
their ideas at any given opportunity are today
stumped. “We have little to say as we ourselves
are not confident as to what’s next,” said one in
self-defense. Another added, “These are difficult
times like no other and any prediction
can turn out to be a predicament.” Time magazine,
in its October 13th issue described what
it called ‘The New Hard Times’. But investors
are finding it hard to swallow this drainage
of wealth, especially those who entered
the markets thinking it was a one-way street.
“If they are shy to predict then are we at the
mercy of God in such times?” asked Pritam
Kaur, a trader who entered the market for the
first time in his life this year. Whether we are
at the mercy of the Almighty is a debatable
question, but the internet is full of predictions
made on the basis of astrological charts using
a plethora of techniques. However, many like
me question the very basics of such forecasts,
but it’s good to see that hope still floats. “It
does,” quips an investment banker. “The old
theory of whatever goes up must come down
is true and so is the reverse of it.”
But many believe the market is already
showing specks of recovery and it can be
a harbinger of things to come. The stock
market historically bottoms out about three
months before a recession ends. As we noted
earlier, most economists believe we’re in a
recession that will last until the end of
March. “It will end as soon as people have
confidence in their abilities and not the
market,” said Ketan Sharma, a stock broker.
“The confidence has hit rock-bottom and
panic seems to rule as people are doing
all that they can to save money. A wellknown
battery manufacturer has declared
he will not send out any New Year’s greetings
cards this time. Though this may
be an extreme form of austerity, all such
measures are hurting other industries like
the advertising industry, and the music
industry. “These are common symptoms of
panic when people go back to the old belief
of savings equal to earnings, but in the long
term it is earnings that make things work,”
added another analyst of India Inc.
But the primary question that still
remains unanswered is, what does a small
retail investor do who has put in hardearned
savings into the stock market hoping
for a better future? Patience seems to
be the new buzz word in such times, and
that’s the advice to people already inside
the juggernaut. No one knows when the
stocks will hit bottom and if at all, when
the market will find the rocks to rest on.
Volumes of research have proved that not
even the pros can figure that out with any
consistency. In the first 40 days of a new
bull market, stocks typically regain a third
of what they lost during the bear phase,
according to Standard & Poor’s. Miss
that and you’ll feel like you got trampled.
Moreover, if you’re out of the market when
the rebound kicks in, the damage to your
future financial well-being could be severe.
Also, make sure that the stock portion of
your portfolio hasn’t become overly tilted
toward ‘defensive’ sectors such as consumer
staples and health care. During unstable
times, these stocks usually underperform.
Gold has never been and never will be out
of vogue when it comes to Indian women,
so for a change you can listen to your wife’s
call and invest in that timeless metal.
Nevertheless, like all dark clouds this
too has its silver lining for this country’s
economic system. “The world banking system
will soon follow us and conservatism,
when it comes to lending, will become the
new mantra for bankers all over, as countries
now scour for ways to nationalize its
banks,” said a banker of a nationalized bank
in New Delhi.
Hope is a tricky word. It cannot unleash its
power by itself but it can make the world go
round through its omnipresence in you. One
man has shown that he can unite a country
torn by very many crises with the old political
promise of ‘Change’. So here’s hoping for a
change in fortune in the year ahead.
Happy New Year!
Archisman Dinda is a freelance writer
based in Calcutta.
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THE INTERNATIONAL INDIAN