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It's Showbiz!

Tracking and predicting the weather is an important function but lying on the ground and trying to draw meaning from the changing shapes of clouds being chased by the wind is madness

Personally, I've never had much respect for the stock market. In fact, on some days, the shenanigans of the stock markets are the chief source of amusement that I and some colleagues of mine have. At the Value Research office, we hardly ever pay any attention to the Sensex except when we are feeling bored. When we feel the need for some light relief, some of us open the day's live Sensex graph on finance.yahoo.co.in, point it out to each other and laugh heartily, as if it were some great joke. We never feel there's anything strange about this behaviour except when we end up doing this in front of a visitor who, in turn, starts looking at us as if there is something strange about our behaviour. The Sensex is a sort of in-house joke at Value Research.

Now I know this sounds heretical coming from someone whose vocation appears to be linked (even if superficially) to the stock market, but I really do feel that there is something funny about the daily curve of the Sensex. Or more precisely, about the deep meaning that so many people are trying to derive from it.

Am I saying that the stock market is a meaningless circus then? No, far from it. The stock market, along with the stock prices of all listed companies and the levels of the various indices are extremely important to the country's and to many of us' economic well-being. What is a meaningless circus is the minute-to-minute hyperventilative tracking of these things. Let me explain it this way. Tracking and predicting the weather is an important function but lying on the ground and trying to draw meaning from the changing shapes of clouds being chased by the wind is madness.

When we look at the day's Sensex curve and laugh, we are actually laughing at those who are lying on the ground and trying to predict the clouds' movements. Take today, for instance, the day when I'm writing these lines. The Sensex opened at somewhere around 10160, moved up to yet another an all-time high (I think) by around 10:20 a.m., then collapsed by about 140 points by noon. At this point it was maybe 50 points below yesterday's close. It then made many half-hearted attacks at the previous close and was eventually successful, reaching 10130 by about 3:15 p.m. before ending the day with another swift fall to finally end up a mere 27 points above yesterday. All in all, it was a fairly entertaining day. Just like Bollywoood blockbusters, it packed a range of emotions into a show lasting just a few hours. And it was free. The BSE doesn't even charge for this entertainment.

As I said earlier, to get the full entertainment value from this production, you have to be thinking of the cloud watchers, which includes individual cloud watchers who call themselves investors as well as the hyperactive cloud-describers on TV who nowadays manage to look more excited than VJs.

There is a lesson in all this. Far too many people are getting carried away by the general idea that the Sensex is an important indicator of something but everyone has a different idea of what that something is. People are buying all sorts of dubious investments just because the Sensex is at 10000. Perhaps Mr. Chidambaram should draw people's attention towards the only thing the Sensex' short-term movements are useful for by imposing a stiff entertainment tax on it.