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Mind your stocks - Views on News from Equitymaster
 
 
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  • May 10, 2002

    Mind your stocks

    Cisco's better than expected numbers and the subsequent interest in software stocks at home are an indication of things to come. The markets will without doubt mirror a rally at the Nasdaq. The question is will there be one at Nasdaq?

    That seems a bit difficult to answer. The Fed left interest rates untouched due to economic uncertainty, though the general trend is that of an improvement. But there are fears that unless business investment picks up substantially the recovery will not be sustainable.

    Coming to India, the ugly head of scams has once gain raised it head. It is now related to government securities, which are supposed to be relatively safer instrument, since these are loans to the Government of India. However, it was not the government that has defaulted but it was the brokers that were the cause of the problem.

    The retail investor, who was still smarting from the outrage by UTI, has valid reasons to be concerned again. If this is what the brokers are upto should he transact at all? But the sad part is with FIIs simply not putting much into the Indian markets, the retail investors are the last hope.

    The investors will come to the stock market only if they feel that they can transact without the fear of losing their money. The regulatory institutions have miserably failed to create an environment where the retail investor feels secure to invest in equities. The have failed to scare the mischief mongers, by not severely punishing those responsible for misdeeds in the past. The UTI scam has just died down. After all it was the unknown Indian's money. And the unknown Indian has chosen to live with the fact that these things are a way of life, instead of fighting back. There has been virtually no protest and of course, the competent authorities are investigating at their own sweet pace. Once again their salaries being paid by the unknown Indian, they don't have bother about the results.

    The gilts have seen price rise very swiftly in the past few months. With oil prices rising the Inflation might head north. The rise might be swift enough to pressurise the RBI against the soft interest rate regime. This will certainly hit gilt prices. Also, softer interest rates means that the corporates will have lower interest burden and therefore, the profitability might improve. The stock markets at low valuations offer an attractive investment opportunity.

    However, the investor has to be on guard all the time. Do your own research. Invest in companies that have solid assets and credentials to back their stock price. Use relatively more transparent methods of transaction like online broking. Agreed this will take a little more of your effort but the gains will be all yours. Like the pain has been in the past for many.

     

     

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