The markets over-reacts amidst mindless selling: Markets fall as Finance Minister watches--the same "Rome Burning and Nero Fiddling story": Does P Chidambarm have no responsibility towards the investors of the stock market?? If he thinks that this is a milch cow for garnering revenues then he is utterly mistaken. Investors in that case should think of alternative methods for the redressal of their grievances, including going to streets or launch some agitation for the exodus of the UPA. The UPA government has already somewhat diluted the "India Shinning Story" popularised by the NDA: The markets looking "Sexy" for further investments. Accumulate the scrips of good companies, using RCA/ SIP Methods:

[UPDATED]

The markets are on intense selling mode with a slight provocation from the Wall Street--this has now become a common practice. Yesterday Wall closed with both Dow and Nasdaq in the red. But then the last minute selling in the US was not as directionless as it is in case for India and some other Asian Economies. Here it seems the world is going to stand-still in the next 50 years and hence people are trying to make as much hay as possible in the given time. This is a wrong way of viewing an economy which is moving at a pace which is even envied by the developed economies.This problem is aggrevated by occassional belching of conflicting outlooks by the "So called Market Experts, which we fondly called Technical Analysts these days I still do not know why they are called Technical Analysts, when techniques are needed in every business. Hence in this context all businessmen should be called a "Technical Analyst". They should rather be dubbed as mere "Graphics Experts" as there is nothing technical to read some Old Graphs and give hoch poch predictions. The markets can never be dictated by technical calls and all those persons from our "Local Paan Walla to street vendor" who invest in the markets using the tips from "Technical Guys" in the short term will anyway "Perish this time". The problem lies when ur watchman starts saying about 200 day moving average and ur maid sevant, "Champa Bai" starts investing in the markets using "Technical Calls". That is why I am in favour of value investing which is very easy as it irons out all the kinks in the system over a period.

I saw one of the so called "Technical Analysts", asking all to sell everything and get out, as if some aliens have attacked us and the world is going to perish within the next 7 days. This kind of "Ostrich" mentality should be stopped by the SEBI by bringing stict for these "Shameless Creatures". I think SEBI should ban these technical analysts from uttering anything in the media. This is this breed of "jockers" who are the real nuisense these days.

Now let us look what in Realty do we have now:

• Indian budget for FY09, has been more or less growth oriented and neutral. This budget balances consumption and elections with the same breadth. This budget looks fiscally ambitious, consumer and consumption oriented, and populist for the farmer. The overall package from an economic, political and market perspective, seems fairly balanced. It seeks to address improving consumption with fiscal incentives to most of the sectors. So I do not think there is any monster in it that we should worry so much in the days to come.
• The budget appears fiscally conservative with targeted deficit of 2.5%, whic is good, apparantly. But then, though revenue numbers are conservative, but expenditure growth at only 6% is not, with no provision for likely costs on pay increases, farmer loan write-offs, and other subsidies. Effectively, while the fiscal direction is right, the level is probably not. This is somewhat a matter of concern.
• Efforts have been made to give consumption push by effecting income tax rates for middle income lowered (through tax slab adjustments), indirect taxes on good reduced 1-2%, and car/scooters get hefty tax cut. This should bolster consumption in a large section of the populace, and an area of economic slack. This will be the main driver of the economy going forward.
• The budget has proposed a significant farmer loan write-off though the modus operandi is not clear (yet), and the risk to banks (earnings and policy) high. It is populist, and the moral hazard risk possibly bigger than the economic cost. But then FM has categorically said that this will indirectly help the banks to clear-off their debt burdern. If this happens then the banking sector (specially the PSU banking) sector will be again on a high growth trajectory.
• On the flip side the FM, has taken a wrong decision to increase the SHORT TERM CAPITAL GAINS TAX to check the short term volatility. This will on the other hand bring in more volatility in the short term as the traders and speculators will now go for higher risky bets to increase their incomes. This clearly shows that the FM, is not well versed with the activities of the Indian bourses. He should take some refresher courses in the Equity Market or not stop interferring with its activities like a lay man.

So what should the FM do immediately to stem the fall in the Indian Bourses:

1. Roll back the hike in short term capital gains tax, but decrease the banks' exposure to the capital markets.

2. He should stop looking at the Global markets to take a directional call on the Indian Bourses, which should do well as compared to its peers and developed economies.

3. P Chidambaram, should discuss with RBI regarding immediate cutting of Interest Rates to spur further growth. It is because Indians do not need a sagging economy at the cost of selling it to the "Inflation Monster". What I meant to say is that the FM should stop giving priority to inflation for the time being unless it spirals out of proportion. Is it not good to get the FII money into India, rather than FII leaving India for good. HE SHOULD UNDERSTAND THAT IF THE FIIs are made to believe that they will get higher interest rates here, as the US will be going for further cut in the interest rates, or they will get more returns in India than investing in the US, they will never leave India. FM's task is now to go for dialogues with the Major FIIs, to go for more friendlier policies.

4. FM should take note of the fact that it is useless to go after Inflation at this stage because, the global factors are responsible for inflation and less by the domestic reasons. Hence thinking of controlling inflation when the crude is at $105 plus per barrel, will be just "beating the bush". FM has already diluted the Indian Shinning Story by siding with the Left Parties. I am sure he will not further damage his reputation by siding with the Leftist Ethos. Having said all these I do not think that with 4 (four) Indians in the 10 ten of the billionare list in the Forbes Magazine, we should think too much where the US economy is going like the other South-Asian Economies do. India though many call as emerging economy but it is attuned more to the frontier economies like Pakistan, Kazakistan, Bolivia, etc. Thus all these selling could stop immediately if the FM does not sit ideal like a lame duck and comes up with the comprehensive policies so that the confidence of the investors are built. But the real question will the FM be able to come out of his shell and view the market proactively?? I hope he will soon come up with solid measures to restore the faith of millions of investors of the Indian Bourses.

Now this write-up will be incomplete with a few words on the US economy. I think most of the average investors do not understand how the mighty US economy behaves and hence whenever they see Dow or Nasdaq going for the red button they start selling. What is to be understood is that all these selling in the US market is mostly due to bad performance of Finance Related stocks. Other companies which are into commodities space should do well going forward, due to huge demand coming not only from India and China but also from other emerging and frontier economies.

Yesterday Wall-Mart came out with encouraging set of numbers for the February, 2008 nullifying the claim of some experts that the retail is slowing down in a drastic pace. Even as the US was going for a good hair cut, Wall Mart was standing rock solid like the Mighty Himalayas. Though it cannot be denied that the retail sales were made to slow due to large scale measures taken by the US machinery during the last few months, it has gone only for a "Soft landing". I do not know why there is so hue and cry about the slowing down of the US economy, when it was MADE TO SLOW DOWN DUE TO A SERIOUS OF MEASURES TAKEN LAST YEAR to tame INFLATION. Hence I think once the skeletons stops coming out of the coffers in the US, the Wall Street will be stabilised taking along with it the "Emerging Economies" The commodity prices are already shooting over the roof. OPEC has already said that they will not tinkle with the production data and hence high crude prices are to continue for some more days. This will bring more revenues to the Oil Exploration Giants in the US and in India, like Exxon Mobil, Aban Lloyd, ONGC, Reliance Industries Ltd etc. Moreover, the Global Mining Mammths like BHP Billiton will also get benefitted due to high cost of commodities. OVERALL I THINK THAT THIS MINDLESS SELLING WILL STOP SOON AND THE MARKETS WILL AGAIN START TO MOVE UP. HENCE THE INVESTORS COULD BUY GOOD SCRIPS IN INSTALLMENTS USING SIP/RCAM.

AT THE END I QUOTE THE FM, "The developed economies will fear us". When the FM is so confident about our economy, I do not understand why one should bother too much if one of the largest economy is artificially made to slow to tame inflation. The market pain will be over by Next May--June, 2008--till then hold on to ur positions and for for "Lankavi or Europe Tour" to refresh yourself.