Human mentality doesn’t cease to surprise. Astound even.
We all have come to believe that the stock markets seem to move much more with tiny human sentiment, and less due to company or industry fundamentals.
Lets have a look at the Sensex movement in relation to ‘sentiments’.
I’ve taken the Sensex merely as a representation of the fluctuation of such sentiments.
When the world was hit by the sub-prime crisis, the all-famous Global Meltdown, Indians saw the Sensex “melt” over the next few months, as shown below:
The markets were beaten down to about 60% of their August 2008 levels. And it took the Sensex about 9 months to go through the meltdown to regain those August 2008 levels.
And August and September of 2010 saw not one or two, but a series of scams happen at home. If we start with the CommonWealth Games scam of (I say ‘start with’ to define a period I’m talking about, as many of us have literally grown up hearing about one scam or another, and have taken them as inseparable parts of our lives); around Rs.70,000 crore. Some magicians seem to make the Taj Mahal or a big truck disappear. These folk must have thought, ‘what the hell, let’s make unimaginable amounts of money disappear’, and that, under the watchful eye of the authorities, who then managed to brilliantly gasp when the scam was brought to light.
Anyway, after that came the 2G scam of around Rs.1.76 lakh crore, and the even harder to digest news of involvement of the Tata Group in the same. Around the same time, we also had the Adarsh Society scam, where shameless, soulless individuals deprived war widows of homes in an attempt to satisfy their own greed.
So, lets say between September 2010 and Jan 2010, we’ve seen three shameful scams involving ridiculously high values. Lets have a look at how the Sensex moved around this time while we all sat in front of our TV sets eating popcorn and swallowing scam after scam:
Surprisingly, the index didn’t fluctuate more than a 1000 points. Despite the fact that such news dealt a hard blow to the economy. And to the image of India and that of every Indian the world over (not necessarily in that order).
Guess all we Indians would say to this is, “who the hell cares about scams or whatever, they’re part and parcel of life. All we’re concerned about is our money. And image, err.. What image?”
And foreign investors observe and learn fast; so tomorrow it’s just business as usual.
(like ol’ times, these are my views, and you are free to comment/ disagree/ discuss).
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Totally agree…and even after this tabloids & news channels raise a hue & cry over sensex dipping below 20k levels….it shld hv gone down to 15-16k (to say the least) by nw with these ridiculous turn of events. And these r just the scams tht we r being made aware of……wht lies beneath the tip of ths ice-berg may be unimaginable. Particularly like the last line on the learning curve of foreign investors….not long b4 they drift to greener options.
You’re right about it possibly being the tip of an iceberg, Su. But I guess if we found out about too many more, we’d see great migrations happening. About foreign investors learning curve, am not too certain about what they’ve learnt. Under normal circumstances, news of large scams would be sufficient to make a foreign investor uncertain and extremely cautious, if not panic; but apparently it hasn’t. So while there still undeniably is, a huge potential and scope for growth in India, the steadiness of the markets during the recent scams indicates that perhaps foreign investors know the Indian way of operating, which is why they too, like us citizens, have chosen to ignore the chaos, the dark side of things, and just stay invested in a hopefully brighter tomorrow.