While flipping through channels after the close of another tiring bull session on Dalal Street, I came
across a CNN Business Asia interview with an analyst from a leading securities house on the Indian
markets. Happy that CNN had found some time and money to show footage on India which excluded
snake charmers and fanatics breaking ancient disputed structures, I decided to see what the global
media channel had to show us and listen to what the host and the guest had to say.
Asked to comment about the run up in the Index to the 4,400 level in July, the analyst interviewed
spoke about this great surge in domestic liquidity which has helped pushed Dalal Street to new highs
and mentioned that the FIIs have been aggressive buyers of Indian equity. When questioned about the
future direction of the Index (will this rally continue given the state of politics) pat came the reply with
words to the following effect: Politics does not matter since all political parties have a pro-reform
agenda and the real story in India is that consumption is increasing due to the large middle class
inspired by what they see on CNN!!!
Taken aback at being given the credit for causing the BSE-30 Index to hit a 34-month high, the host on
the show said: "So this could be called a CNN rally?". "Yes", said the guest, and they moved on leaving
me in utter shock at the simplicity of a statement flashed to the world as gospel truth. The great thing
about television is that in that 180 seconds reserved for us we leave impressions that influence the way
people think and, ultimately, act. And television cameras and programmers love cute lines and gestures
and glorify these fleeting electronic beams as records of history - and fact. That is neither the fault of
television the medium nor the people interviewed on television but, rather, a statement of our times.
Television fulfills our desire for quick stuff just like fast cars, fast food, rapidfire imagery, while - if a
Bombay newspaper article is to be believed - fast college chicks fulfill other needs.
So if I was a fund manager, unfamiliar with the ground reality in India, and had heard this particular
180 second "tell us what you think electronic tamasha", I would conjure up this image of a country
where every politician is outdoing the other to win a medal from Maggie Thatcher and an invitation
from Bill Clinton to join the G-8 based on the emergence of the Indian economic superpower. I would
visualise politicians picking up shovels and building roads and dams in every nook and corner of the
country marching ahead towards economic glory. If I closed my eyes, I would picture hundreds of
millions of Indians (remember, India has 200 million middle class people) lining up outside stores buying
televisions and ready to cook foods which they load onto their new middle-class cars: all apeing the
values and images that CNN beams into our middle class homes every day.
As a fund manager, unfamilar with the stark images of poverty and politicians fighting each other, I
may not realise that CNN is probably received by less than 1% of all middle class homes and that
Indian industry has yet to show signs of recovering from an economic slowdown that began 12 months
ago. As a fund manager sitting in pleasant New York, I may not be aware of the thinness and the
tinnines of this market rally and how all of it is based on the assumption that my foreign dollars will
continue to zap the trading screens of the BSE and the NSE.
Nor will I, the regional fund manager, know that the low PE multiples of this market (the lowest PE
ratio in Asia!) are based on the assumption of a growth in earnings of 25% and above for the financial
year ending March 1998 - an unlikely scenario given the anaemic first quarter economic recovery. And
as a fund manager sitting in Singapore, London, or New York having recently been given the
responsibility of managing Indian investments, I may not know that on all previous occassions when
everyone said "politics is immaterial and the economic process irreversible", the market plunged after
the political equations changed as social time bombs were set off to gain political advantage. But that is
the wonder of CNN. Or MSNBC or the dozens of financial channels that have sprung up in every G-8
aspiring country. These financial channels bring the floor of the exchanges into your living room with
ticker tapes telling you the volumes and prices of different transactions for all kinds of products
(shares, bonds, corn, wheat, gold, oil) as they occur in some opague corner of the financial globe. In ten
years time, the media has been able to package financial products into entertainment that can be
financially appealing. The fast-talking hosts are effectively selling you a product: After you've bought
your cereals, soaps, and shampoos how about buying some shares? The financial news channels have
been a success.
In 1985 money under management in equity funds in USA was US$ 117 billion, in 1995 it was US$
1,269 billion and in 1997 it is estimated to be US$ 3,000 billion. In 1985, all this money in the US equity
funds came from 11.5 million accounts; in 1995 there were 71 million account holders. What is true for
the United States is true for the rest of the world whether it is Hong Kong, Indonesia, India, or Russia:
one of the fastest growing industries has been the financial services industry. The dissemination of
information on a global scale is some sort of a safety net against a global meltdown. When the Dow
collapsed in October 1987 by 508 points (30% in one day), I remember getting a telex from Warburg
informing us that the Dow had plunged. On reading the telex, the late Mr Ashok Birla wondered if
there was a mistake of a decimal point.
There was no fax, email, internet, or CNN in those days but my guess is, if there was, the Dow would
not have fallen so far, so fast dragging the rest of the world with it. The rock steady reassuring
programme hosts on CNN, MSNBC and all the analysts and guests would have talked the Dow up and
prevented living room investors from panicking and throwing in the towel. In many ways the host of the
show who sought a confirmation that the present bull run on Dalal Street "a CNN rally" is correct. The
world and media have changed beyond recognition and sometimes we fail to recognise its power of
persuasion and brashness of views.
The bears will have to go into secular hibernation or seek DNA-modifying injections and convert to
bulls if they still want a career in this industry. Just think about it, if 2 million middle class investors are
consuming products like there is no tomorrow and if a 180 second news capsule can entice fund
managers to buy Indian stocks and drive the Index to 4,400 imagine what will happen when we have a
middle class audience of 200 million watching CNN....sell your TV, buy shares!