Bombay Stock Exchange (BSE), India's leading stock exchange saw heavy sell in last few trading sessions. BSE is very sensitive to the world indices, whenever something happens anywhere in the world, it falls. Indian economy is still not very much integrated with the world economy, then why this happens? I think this is more to do with the moral and sentiments of the traders, mutual funds and institutional investors. An Indian population is not interested in investing in stock market as retail investor and even mutual funds are not very popular schemes for investment. Urban population has started to invest in the stock market but still the percentage of retail investor is still very low.
Retail investors are afraid of investing in stock market because of these free falls in the market and they are not well aware of equities to invest in. It has happened in the past that the company get listed on the stock exchange only to collect money from the investors and then it closes its operations (though it is very rare now a day). I feel that retail investors are quite passive investors and invest for long term that helps in reducing the volatility in the market. Since Indian Stock Exchanges are mainly depended on institutions, they can be moved in any direction by just few institutions.
There is no change in the fundamentals of the companies operation in the country. Since most of the production in consumed locally (very little export of anything to be of any significance in the world economy), production should not be affected to very large extent. If the demand of the goods remain there and supply side is ready to fulfil that than the economy should continue to grow.
In fact, I see another good point in recession worldwide. If the export, whatever little India has, goes down, it will have more supply for local market than the demand and that will push the prices down and that should help the central bank (Reserve Bank of India) and Ministry of Finance in keeping inflation low.
Retail investors are afraid of investing in stock market because of these free falls in the market and they are not well aware of equities to invest in. It has happened in the past that the company get listed on the stock exchange only to collect money from the investors and then it closes its operations (though it is very rare now a day). I feel that retail investors are quite passive investors and invest for long term that helps in reducing the volatility in the market. Since Indian Stock Exchanges are mainly depended on institutions, they can be moved in any direction by just few institutions.
There is no change in the fundamentals of the companies operation in the country. Since most of the production in consumed locally (very little export of anything to be of any significance in the world economy), production should not be affected to very large extent. If the demand of the goods remain there and supply side is ready to fulfil that than the economy should continue to grow.
In fact, I see another good point in recession worldwide. If the export, whatever little India has, goes down, it will have more supply for local market than the demand and that will push the prices down and that should help the central bank (Reserve Bank of India) and Ministry of Finance in keeping inflation low.
So in my opinion, growth might slow down in terms of percentage but it will not be recession for the economy.
No comments:
Post a Comment