This is a communication from India's best fund manager "Samir Arora" to the investors of Alliance Mutual fund in 2001. The way he has summed up the events makes for a very interesting reading.
‘2001 Kabhi Khushi Kabhie Gham’... Samir Arora
Yaadein of the Indian stock markets in 2001 leaves one quite breathless. The year started off with a lot of Josh as investors had high expectations from the market after a disappointing 2000. The first two months of the year went off quite smoothly as investors focussed on the Indian budget, but in the Jungle of developments-global and local, the markets missed more than a mere Dhadkan.
Against a background of low expectations, the Indian budget came as a pleasant surprise. Cut in corporate and personal Lagaan (due to removal of surcharge) and a structural shift to lower interest rates were welcomed by the markets. In view of the government’s current state of Amdani Athanni Kharcha Rupaiyah much needed emphasis was placed on privatization and reduction in the size of the government. It is a different matter that nothing substantial has been achieved on these issues with three months left in the current year. Euphoria regarding the Indian budget lasted less than a day. Speculative unwinding, global meltdown of technology stocks-Pyaar Tune Kya Kiya- after the Paagalpan of 1999 and early 2000, introduction of Ajanabee rolling system and other problems led to Dooriyan between the investor and the stock market. Disappointed with the behavior of the markets post budget the government said Had Kar Di Aapne to the speculators and set up a Joint Parliamentary Committee to investigate why markets were behaving the way they did.
During the year, the world faced its first global synchronous recession in nearly three decades. Markets around the world were in Gadar as investors who were for many years in Pyaar with the markets were now in complete Khauff of it.
And then came September 11th. Hey Ram! Such heinous and despicable act of terrorism brought the world together to fight the unseen enemy. The markets reached their bottom within ten days of 9/11 and Chori Chori Chupke Chupke the markets started moving up well before any signs of success in the war against terrorism or economic revival had become evident. Many sceptics feel that fundamentals in the global and indeed Indian economy have not improved and are unable to reconcile it with the state of Sarfarosh and Deewanapan in the markets recently. However, the stock markets have an uncanny ability to forecast and discount the future and it seems that the world markets are predicting the end of recession in the USA in mid-2002.
In 2001 we also see the extremely high correlation between the Indian and US markets. It is interesting to note that the Sensex reached its bottom on the same day (September 21st) as NASDAQ and the Dow. Separately, even prior to September 11th we observed and were indeed saddened by the fact that the Indian markets have completely surrendered their independence to global and macro trends without any appreciation of the strengths and relative insulation (from global slowdown) of many Indian companies. We need to develop a class of investors who have their own Astitwa and can tell the foreign investors – Yeh Tera Ghar Yeh Mera Ghar rather than getting lost in their Bawandar. Of course it is not true that all our problems are caused by global factors for we are quite self sufficient in creating our own problems.
Dil Chahta Hai that 2002 be a much better year than 2001. Last two years have been disappointing to say the least but –Phir Bhi Dil Hai Hindustani- there are many reasons for being bullish on India. Low interest rates, attractive valuations, good corporate performance from a number of Indian businesses and sectors and large retail cash position on the sideline earning record low interest rates is a potent combination for any market and we expect India to do well in 2002.
One important lesson investors can draw from the recent rally is that the price of certainty is very high in stock markets. Investors waiting for all factors to fall in place before committing money to equities can forgo significant potential gains. Investors should look at equities as a regular part of their savings plan rather than as one off market timing decision. Bas, Itna Sa Khwab Hai.
Edited by basant - 29/Aug/2006 at 9:56pm