Understanding the market of inventories
In case you are wondering what is a market of inventory, where do I find that, etc – well, I was just referring to the Stock Market. I know some of you might immediately react that I am trying to achieve something that no one in the world has been able to do so far in the history of mankind. They also remind me that you cannot understand two things in the world – women and stock market – and both of them believe in keeping ‘stocks’ – one likes to keep ‘stock’ of unwanted things that they get through an exercise called ‘shopping’; the other also keeps ‘stock’ of how many people have gone bankrupt in chasing for excellence in this area.
Well, let me make an honest attempt – that too in public with a very high risk of failure; I am surely a brave man !
Today Sensex in India has dropped by 250+ points in a single day – in this process, eroding the wealth and happiness of many people. The reason behind this great fall is the rise of 50 points in the interest rates by Reserve Bank of India in order to control the uncontrollable inflation. See, I am surely understanding the dynamics behind the rise and fall of the market – well that’s an innocent claim ! Because when there was a similar increase in interest rates few months ago, there was a similar fall – but that was only for a day. The next day the market went up by 150+ points – is it that the impact of interest rate increase is only for a day ? Nooooooooo – but still the market defies logic for its ups and downs.
Petrol prices rose by Rs 5/- (around 8%) in a single day, the market fell – which was quite understandable, isn’t it ? However, when the diesel prices went up, the market did not fall as much it fell when petrol prices went up. And people say that diesel influences the common food, retail, transport and distribution markets more than petrol !
Many experts say that the market is ruled by the sentiment of the traders and retailers. What sentiment ? Does trading really depend on the mood of the individuals ? Then I am sure if all salaried people gets their yearly increment on a single day of a year, Sensex will reach the moon the very next day.
One of the reasons behind the Sensex movements is the amount of FDI that comes into the Indian market. Makes sense, definitely … but is there any way to anticipate that tomorrow FDI investment will be very high or low ? Don’t know – maybe the experts will be knowing that …
The legendary Mr. Buffet mentions that while investing in stocks, do not try to time the market. Go for the stocks of fundamentally good corporations, believe in their business model, product portfolio, management team – then go hard for those stocks, have a longer investment horizon, etc etc. Well, that is logical, makes sense and not rocket science stuff … but you know why everyone is not a Warren Buffet ? Because simple, basic stuff are always very very difficult to implement.
There was an article in Rediff few years ago which tried to link the performance of Sachin Tendulkar with the behaviour of stock market. It stated with some statistics that whenever Sachin scored a century or played very well, the market rose considerably the next day. Being a die-hard Sachin fan, I definitely approve that view ! And with that logic, I am sure we will all see quite a few number of days in the future when the markets will rise considerably !
No, I give up … will continue my unending quest to conquer the impossible goal … and while doing so, I will be giving free advice on this subject with the guarantee that there will be no guarantee of returns.