Changing theories in Dalal Street

The same factors that were supporting the market have become a drag on it overnight

It is amusing to see how theories change overnight in Dalal Street. Today, the market is down by 600 points, and the market pundits are busy listing reasons behind the fall. But the only trouble is that the list looks vaguely familiar: fall in crude prices, trouble in some foreign shore, likely rate cut by RBI, slow down in FII flows, Q 3 results, and so on. Ironically, if these gurus are to be believed, the same set of factors that were aiding the rally in the market until yesterday have become a drag on the market overnight.

Consider each point carefully. Fall in crude prices. You would remember that most market pundits used to cite the trend in crude prices as a big plus for the Indian markets. Some pundits even suggested that India stands to save huge amount of money with so many zeroes that would rival the famous CAG figure. The new government would be able to plug its deficit, spend big on infrastructure, etc, with that money, we were told. And then the crude hits multi-year low yesterday and the theory is turned on its head.

Similarly, the trouble abroad was another familiar theme. Where will the foreign investors go, many experts used to ask triumphantly. The reasoning was that the foreign investors don't have an option but to invest in India, as it was the only country that has the promise of growing at 6% plus. But today, it seems, many investors have suddenly became nervous about the lack of participation of foreign investors.

Nobody was hoping that Raghuram Rajan would oblige the market soon on rate cuts. The man has repeatedly said on many occasions that he would start easing rates only after he is convinced that the central bank has succeeded in taming the monster. That promise still holds. So, why is uncertainty about the likely rate cut haunting the market today?

Whoever said companies are going to post outstanding results next year? Nobody. In fact, that should be a huge plus for a market that is prone to exaggeration. So why some people are suddenly worried that nothing dramatic is going to happen in the next quarter?

Well, traders have to invent reasons to justify their transactions. But should a regular investor pay any attention to those reasons? Especially when he or she knows that these self-serving theories don't help anyone to make money in the market over a long period? Isn't it better to shut out these noises and peacefully carry on with one's SIPs in equity funds? Or better still, why not invest in an index fund and kick these gurus of daily market movements out of life forever.

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