The human brain is great, make no mistake about that. The worry is ‘how useful is it when it comes to investing or even trading.
The answer is : It is not useful at all.
When man was in the hunting stage he knew that ever tiger killed and every deer was food. Surely a few men got killed when the went near an animal without realising what it could do, but he learnt very quickly.
Now in the equity market if the equities fall for 2 days in a row..he calls it a “falling market”. Actually neither he nor the media know what it is going to do the next day.
However the media headline is “Over the last 2 days investors lost Rs. 23,000 crores when the equity markets CRASHED by 110 points”.
Think who lost? the person who invested, stayed invested, or the person who SOLD at the end of the day?
Actually on a day when you see such a headline you should be laughing…and BUYING instead of joining the “I love my India but markets are bad” and selling, YOU SHOULD BE BUYING. So when you hear doomsday from the experts, you should do what you think is right. Tell me who loses on a day when the market falls 1000 points? buyer or seller? What do you do? YOU SELL.
You should actually be buying when you hear that the ‘markets are falling’.
Ok what do you do when you hear “Na Mo has become PM..the world is looking great..and the markets will run up..blah blah…’ or when you hear the media say “Markets reach…and are now at an all time high…blah blah…’ or the “FIIs have invested…Rs. 54,000 crores….” Buy or sell? Maybe Sell?
What do you end up doing? buy? because you felt good about the market?
Now let us come to FDI. If FDI becomes easier will markets go up or down?
I was talking to a banking analyst from NY. He is in a position to invest about 3 Billion US $ and was looking at Indian banking stocks. He does not have too much of a choice. He has to buy SBI, ICICI, and Hdfc bank. Only after investing in these 3 can he think of Indian stocks in the same space. So when he spoke about Cholamandalam Investment and Finance, he was clear why he would invest. Very few Indian companies have a good balance sheet and do second hand truck financing, etc. So even in Hdfc, Icici and Citibank want to be in second hand truck financing – they are better off investing in Chola or buying the portfolio from chola through a spv. And Chola’s spv will go at very fine rates even without recourse.
Now cut to a foreign investor who wants to manufacture and sell in India. He thinks it is impossible to do business in India. So what does he do? He buys HuL, Siemens, Cummins, Colgate, Ingersoll Rand, ..etc. etc.
If India were to make investing very easy..what would he do? he would simply set up shop in India.
So here some contrarian ideas for your brain to chew on…enjoy!!
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