Timing the Stock Market

When to buy stocks :

The simple answer is when everybody else is selling. Today our markets are at a very critical juncture. There is blood on the Dalal Street. The stocks are selling at a heavy discount. Since most of the bad news is factored in, it cannot go worse now, or can it? Someone who buys now can make gains in excess of 50% over a period of next one year. 

The reasons for such a situation are many.

The GOI is suffering from bureautic hurdles. There are only advisors but no body to act on the decisions already taken. Saving his own chair is more important then the country first. There are too many file movers, i.e., bureaucrats  Today, again we need somebody like Mr.Narasimha Rao or Mr. Rajiv Gandhi, ex-Prime Ministers of India, who had the courage to take decisions which made India one of the fastest growing economies in the world. The first one implemented what World Bank suggested. The second Prime Minister made India a force to be reckoned with in the field of Information Technology. This sector has also led to massive employment generation.

According GOI own survey employment generation has actually gone down in last four years. Inflationn is at all time high.It simply means that market's saving and also purchasing power has gone down substantially. 

Another important aspect to be critically noted is, that where ever Govt. has interfered  it has almost killed that Industry. The list is long:

1. Microfinance,  once a booming business with almost negligible NPA, has been killed by GOI by bringing in regulation. The poor fellow, the farmer, is now again forced to go to a money lender to meet his financial needs.

2.Most recent example is Centuries old Gold & Jewellery business, which never troubled any Govt in the past has become an eyesore for the current Govt., without actually understanding why people buy Gold & Jewellery. We are back to the route of illegal channels /imports. It may so happen that Govt. may eventually block the bank financing to this sector,which will be the death of the business. It is again, a step backward, i.e., going back on a policy decision taken in the past, based on which the corporations built their business models. How can a Govt. tell banks not to fund such a successful and profitable sector. Conversely, it keeps telling banks to lend and lend more to power sector, where there is no recovery of loans from almost all the loss making DISCOMS, Why because they are told to sell power free to certain sectors of the society which is Govt.'s biggest vote bank.  This vote bank business is hurting our banking sector adversely and actually amounts to misuse of taxpayers money.

3. In the name of Financial Inclusion, all the PSU Banks have been brought on the road to bankruptcy, again without understanding the basic requirements of Financial Inclusion.    

4. Indian Rupee is at all time low and our RBI says we will not intervene. OK, please do not intervene, but why tell your strategy openly to your opponents.

5. Govt. wants to widen the reach of Indian Banks , but, again RBI has framed rules which are so restrictive that not many or probable none will apply for a new Banking license, thereby limiting the growth of Banking industry, which is highly under penetrated  Even for opening of a new branch by any existing Bank, one has to seek permission from RBI. Why? there is no answer. Please take a call, more banks for faster penetration or "me supreme to decide whom to give and whom not to give license"?.

6. Govt. announced SEZ policy and corporations created SEZ,s, but then one wise gentleman in the Govt. thought let me put "Minimum Alternate Tax" (MAT) on SEZ Zones also, there by defeating the very purpose of SEZ Policy. Now most of the Special Economic Zones have been closed.  


7. Telecom sector, once a booming sector, is again passing through its most difficult phase, due to inconsistent policy of the Govt. Competition is at all time low, tariff is at its all time high.golden goose has been killed in one shot.

8. Life Corporation of India,(LIC), again being used as a disinvestment vehicle to siphon off policyholders money for forcibly selling shares to LIC, the value of which has been eroded badly. Such a  fine financial Institution is being destroyed by our bureaucrats. Now, under such circumstances what returns, in the form of bonus, can it pay to policyholders? 

We feel that most of the People in the current Ministry have reached their "level of Incompetence". Therefore, without waiting for a moment, the need of the hour is immediate elections so that a new elected Govt. can be formed immediately who can take India forward to the path to recovery. Waiting for another 1.5 year will be suicidal for the country's economy.

What are the other measures which can be taken to bring back the growth in the economy.

1. First and foremost is to bring down the interest rates as low and as fast as possible. World wide interest rates are as low as 0% or 1%. In India, it is 10-11%, making it a high cost economy. We have lost our competitive position in the World in the name of high inflation. Do we buy our daily needs based on the inflation. But we do buy homes when the interest rates are low. High interest rates again kill my saving rate and the consequent loss of my purchasing power. The high interest rates have a cascading bad effect on the whole economy, which actually increase inflation, having a direct one to one relationship with the cost of capital vs selling price of finished goods.

So friends, thing cannot go wrong any further. Every economy has cyclicals peaks and valleys. We are on on the verge of moving up from the current valley to scale now peaks in the coming months.We have everything to gain now. There is a big , bright light at the end of every tunnel.Start SIP and start buying in small lots.

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