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Of Cowards and Bulls

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DQI Bureau
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Money is the biggest coward and goes to the safest places. And wherever there’s

trouble, money and those that control big chunks of it can generally be found

running toward the closest nuclear bunker. If we talk India right about now,

then the ‘N’ word assumes many new meanings–nuclear (fears), negative

(sentiment), neutered (market watchdogs), and of course, neanderthal (policies).

The last three factors are in themselves enough to send the staunchest of

India-backers scurrying away, but it is the first which we are really talking

about today. Because today, things are different.

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Case A: War clouds are looming, cry newspapers and television channels–punters

miss a heartbeat and the benchmark index plunges a 100 points. Gen Pervez

Musharraf announces further troop movement toward the border–the small

investor stutters and the Sensex slips 100 points. AB Vajpayee vows to make

every Paki soldier remember his mother’s mother–the Sensex embraces the man

with the nuclear buttons and jumps 88. Musharraf test-fires a ballistic missile–the

market thumbs it’s nose right back at him, slithering by just 8 points. George

Fernandes retaliates, and orders five Indian vessels to sail toward Pakistan’s

territorial waters–the Sensex jumps only 13 points.

Politics plays a role in determining market movement, but it has its limits.

Case B: Adlabs announces sharply higher profits–the scrip surges.

Telco abandons operations in Bihar after many new vehicles are commandeered for

Laloo Prasad’s daughter’s wedding cavalcade–many companies drop their

plans for the state. Infosys lowers growth forecasts for the coming year–the

long-term outlook for the scrip weakens. Cisco increases marketshare while the

competition loses its combined share by half–the scrip jumps. TCS consolidates

its position, and Tata buys out CMC and a slice of VSNL–group IT fortunes move

skyward.

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In the ultimate analysis, fundamentals–and fundamentals alone–determine

performance.

The way forward



FY 2002-03 is going to be an exciting year for the global economy, but it’ll

also be one that’ll have to be watched closely by the corporate sector.

Business, clearly, has a problem–when the experts themselves don’t seem to

know which way things will turn, who does business turn to? The answer is a

no-brainer–what works, typically, when the larger economic environment takes a

beating is individual fundamentals, fundamentals, and more fundamentals… The

market is currently range-bound between the 3,100 and 3,190 levels. Should one

enter now, or forget it?

Let’s face it–our watchdog is toothless and can do little to stem

corruption, or punish graft once detected. Our analysts are mouthpieces for

those who pay the most. Our financial sector is full of lambs that get

slaughtered by bulls in new avatars. Our accountants are rascals. The market is

rigged, playing to an orchestrated tune. The government wakes up after the horse

has knocked the barn door off its hinges, bolted, found a new owner and won the

next major derby. What do you do?

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Jump right back in



I say get right back in and invest in the market… get right back in and

get your savings flowing and earning. The Parekhs and Shahs have made today’s

investor hypersensitive to fraud. The very failure of the system will see it

whip itself back into shape. Every new investor, and older ones marking a

cautious re-entry, will seek more information on company health, management and

plans before investing. For this, if not for other compelling reasons, India’s

companies will have to be forthcoming in their financial disclosures. And as

financial reporting gets cleaner, volatility will be eased.

For those that pooh pooh this theory, chew on this. The market has barely

lost a 100 points in the last year despite threats of war, a government that

could have fallen at any moment, 9.11, the attack on Parliament, the tech-led

slump... At some point, for any business to continue being a business, it has to

decide it’s had enough of sentiment and needs to do what it is designed to do–make

money and continue to grow. The Indian market may be late in the maturing, but

it is finally growing up.

Rajeev Narayan in New Delhi

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