Saturday, October 18, 2008

Only 4 digits now!

The Indian stock market fell yesterday too, and it fell to an unimaginable level. The BSE30 (commonly known as Sensex) fell below 10,000! Its a four figured Sensex now. Too bad, really very bad. The Sensex today is available at more than 50% discount compared to its peak of 21,000 in Jan '08. It took 1 and half year to go from 10K to 21K and, hardly 10 months to go back to 10K. We are today where we were in July 2006!!
It was predicted some months ago the sensex would breach the psychologically important mark of ten thousand. But, it was only a prediction. There are so many predictions being told by so many 'experts' that one amongst them will always come to be true. It is like one expert saying it will be heads and, the other saying it will be tails. One of them will be correct no matter what.
People who have invested in Mutual Funds and direct equity have lost a lot. When the market was at 21K, it was predicted that the rally would take the market to 24K. No wonder, some people invested into the market at peak! It was just then when, the hyped Reliance Power IPO happened! The IPO was oversubscribed within the first minute of its launch!! When it closed down, it was oversubscribed more than 60 times, which means, Anil Ambani wished to generate only 11,600crore Rs from the public but, around 7 lakh crore Rs were generated! Most of the subscription was from stock brokers and institutional investors. But, how did so many of them manage to shell out so much money to subscribe to the IPO ? What they did was - they sold the stocks they owned to put money in the IPO. With such enormous selling, the market naturally fell. The market never saw a good day since :( And, the worst part is - Reliance power was listed at a much lower price than was 'predicted'. Today the value of the share is less than half of what it was sold in the IPO(including the bonus issued later). Too bad :( Of course, it was just a matter of events, i do not mean to say that Reliance guys had engineered things to happen this way...
After the subprime crisis hit the US hard, India too was not spared. FIIs took away a lot of their investments in the Indian markets and the markets fell further. Yesterday, Sensex and Nifty fell down breaking all resistances! Nifty broke the one at 3600 long ago, then 3400, then 3200, 3150 and even 3100. The Sensex yesterday had a huge resistance at 10K and, it hovered between 10,100 and 10,000 for around 5mins, once even going to 10003 and rising again. Ultimately it fell below 10K to 9998, to 4 digits again after 2 years! Nobody can say whether this is the bottom, and it is probably not. But, one can say that it is the right time to invest for the long term (5+ years i mean).

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