Last October, I wrote an article. I think it has become more and more relevant these days! Here it is:
http://content.msn.co.in/MSNC ontribute/Story.aspx?PageID=c6 b024b9-977e-485d-94be-822b0bb2 459a
In another year, at a similar time, we were happy. We had good reasons to be happy, our investments were growing at a good rate- no not at a good rate, at an unbelievable rate. Financial gurus and technical experts were all upbeat about the Indian growth story's reflection in the Index of Stocks.
Everyone was fiddling with their demat accounts, from the pan wallah to the IT professional. And they had reasons to do so. Money was pouring into the Indian bourses. Ostensibly, dollars were finding a new home, making partnerships with the rupees. And when one becomes blinded by the quick gains (and they were huge gains), he forgets about his partner- what is he really up to?
Housewives who had nothing to do at home started doing some home shopping. It was all clear in everyone's minds- India is on her way up. No one really noticed the speed with which things were turning out. One of the Seven Deadly Sins had been incurred, incurred on a colossal scale. The Sin was Greed.
People never knew what hit them, how it hit them, and how long was it going to hit them. They had been buying, taking off some air from the bubble that was being built and putting it safely in their electronic balloons. They took off little pieces of the huge volumes that were being traded by the Big Boys, without realizing what the Big Boys were really up to. By sheer luck, the air suddenly expanded in that balloon and they all felt happy.
The Big Boys had a lot of gas, by the way. They created more air, more people got lured into this gaseous trade. The Big Boys never really wanted this to happen. It was amongst themselves- the wrestling for the rising buck (or the falling one). The retail traders were like those irritating house-flies that aggregate when they smell some nice air.
However, the Big Boys were buying then, and buying hard. Were they actually buying? Or just passing the parcel- from one to another at a higher rate? The general public never realized this. And when they were buying, some of us were busy booking profits and buying again- getting lured again by the prospects.
Wow.
Now.
The Big Boys are selling, smartguy! Oops, your money! Why did it suddenly shrink? This should not have happened! But then, how could it happen?
Well, here's how.
There are two ways to make quick money in the bourses if you have a lot of money. (Oh, there's actually only one way to do so- beat the other guy. Buy from him when he's all out, wriggling for cash- and sell to him when he's confident, happy with cash.)
The first way is called the "Call" in the option's market and "Buy" in the future's market.
The second way is called the "Put" in the option's market and "Sell" in the future's market.
The Big Boys were using the first way last year, and what they are doing now is the second way. They had a good margin- a very good one during the second time- almost a 50% one (or maybe more, as time will tell).
And they have good reasons to sell now. The world's economy, that was looking all so spectacular a year ago is now speculated and foresighted as going down a gloomy spiral. The Indian economy, (that was seen as one of the fastest growing economies in the world that would not stop growing for what, some 25-30 years now) has suddenly garnered enough speculation to prove it slowing down, corroborated by the "global factors". The same Boys that were buying so ferociously for 2-3 years into the Indian companies, are now getting their dollars out since they have to be used to pay off other debts that they created by madly (apparently) taking risks.
Now if you look at the Sensex at 8000 some years ago and if you look at it now, the buyers then were buying into relatively expensive stocks. The same scrips, the same companies are now poised at a much better stage, buying other companies outside the nation, having growth prospects better like never before.
Let me put my case straight now:
Fundamentally, the cash investor of this date, of this age is at a beautiful advantage. And the ones who are holding "expensive" material which has suddenly cheapened are at a slight disadvantage. And those who are selling off their goods in sheer panic are going to curse themselves for selling their stuff to some vile, some intelligent buyers who will be cashing in on that a day that's not so far away. And on that day again, the Big Boys shall be playing as usual, unaffected by the sentiment they have created.
StocksCenter
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