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Tuesday, 1 December 2015

Lets make it Absolute

At last I understood the, the law of relativity. It just makes u feel better in today’s fast & furious routine life when u find someone at a disadvantageous position relatively with you.  Attending a family function and going through the usual pleasantries, my mother in law was enquired how is the weather, electricity, water condition in the city by her close relatives. To which she replied only water problem which we get every three days. THREE DAYS !!! U ARE SOO LUCKY… WE GET IT EVERY 45 DAYS…… I didn’t know how to respond, whether to feel happy for us or sad for their poignant situation. But it made us forget about are daily problems. Nothing comes in absolute value these days. Even media covers everything relatively. China slowdown is good for India. India is the only performing emerging market among the BRICS.  But does it help!!!

China’s stock market crashed in August. What have we achieved from then…… slower IIP, escalating food prices leading to increased CPI and of course continued political shenanigans. Even in our stock market everything is discussed relatively with variables like PEs, EPS, ROE, ROCE, EBIT, EBITDA to name a few. Though all these are indispensable, they tend to move towards relative short-term investing in accordance with the mood swings of global bigwigs. Even our banks are asked to compare their NIMs globally. Legendary Warren Buffet bought stakes in Coca Cola, American Express and Wells Fargo, foreseeing future of these companies with respect to their competitive advantage along with future financial growth. Being a fundamental analyst, I am unable to comprehend the short term trend followed by our financial experts not only quarterly but on daily basis. Can value be created through this, not possible, only short term gain is accomplished. Hasty decisions and quick rich results have become the underlying behavior dictated by FIIs for whom emerging markets like India is just an asset class in their portfolio. Thus our stock indices worldwide are no longer barometer of their respective domestic economies in today’s global financial integrated system. So what should retail investors do?  The first step is to become informed investors not driven by rumor or herd mentality. Keeping oneself updated of all systematic and unsystematic risks and financial analysis should be the basis of every stock investment as only FUNDAMENTALS CREATE WEALTH.  

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