|»The Honest Truth by Ajit Dayal|
Nowhere to go?
16 DECEMBER 2009
One report says that India's GDP rose by 7.9% for the quarter ended September 30. This in a quarter where India witnessed one of its worst rainfall levels in decades implying that agricultural activity would not have been growing at its full potential.
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Another report says that industrial production grew at 10.3% for the month of October.
Yet another piece of good news: the advance tax paid by companies is increasing.
But the stock markets seem unimpressed.
Since September 30, 2009 the BSE 30 Index has lost -0.05%. If you add back the benefits of dividends, then the BSE 30 Total Return Index has gained +0.11%.
The NSE 50 has hardly been "nifty". It's been boring and dull.
Not that the world markets have done much better: the MSCI All Country World Index has gained +0.10%.
There is inaction in all this action
There have been about 50 trading days between September 30th and December 11th. So, this translates into a total turnover of 1,000,000 crore...that sounds like a lot. About USD 220 billion. Brokers probably earned an average of 0.2% commission on these trades. Giving them a neat revenue stream of Rs 2,000 crore or Rs 40 crore per trading day.
With the markets flat - could people have made much money?
Maybe some did: they would have needed the skill let (and luck) to have bought each time the market fell and sold just as it hit the top end of this trading band of 16,000 to 17,000 that it seems to be stuck in.
The TV stock market shows have probably had a more difficult time than the stock brokers.
A typical TV channel had maybe 8 hours of live, new coverage of the market. Watching its every move: analysing the results of the companies; looking for breaking news; many quotes and much soul-searching about the US Dollar and the global economy.
Per business channel.
So, given that there are some 6 business channels that is a pretty solid 14.4 million words.
There are 0.8 million words in the Bible, according to a quick search on Google.
Interestingly, there are about 3.7 million words in the US tax code.
So the 14.4 million words spoken over 400 hours of live stock market coverage across 6 TV channels have not moved the markets.
Well, I don't have a lot more to say.
But the action of the lips and the inaction of the market should not stop those with a long term investment outlook from continuing to buy mutual funds and stocks.
Hang on: I am not suggesting that an 80% surge is around the corner.
But this is true: despite the 14.4 million words on business TV channels and the market going nowhere over the past 50 trading days, the Indian economy is growing.
And buying stocks is a long term investment in the long term growth of the economy.
Suggested allocation in Quantum Mutual Funds (after keeping safe money aside)