Tuesday, September 16, 2008

 

India stock market update as of 16 September 2008

The Indian stock market is getting very badly caught up in the global problems. If you look at the overall trends that affect the market, rising inflation and increasing commodity prices (especially foodstuffs and crude oil) were the critical factors that were affecting the economy. Those seem to be slowly on the way down now, with crude temporarily falling below the $100 mark, and the rise in the commodity market slowly coming to an end. These are all good signs for the economy.
However, when the US economy sustains problems, these cause problems for everybody. The rapid decline of some of the largest financial corporations such as Lehman Brothers, Merrill Lynch and AIG have both a direct and indirect effect. They have cross investments in many Indian companies, and can be trusted to sell these as soon as they can. In addition, they are a harbringer of a long term problem in the economy, and leave people with a bad feeling, something that translates into a bad sentiment.
Overall, I know people who are slowly gaining small shares in the market, but at the same time, they are also worried, since even investments bought a few weeks back have fallen. The textbook approach is to keep on making small investments into fundamentally sound companies such as Airtel, Reliance, Tata, and for a risky touch, into some companies that have fallen very badly; they are the ones who are expected to rise within a few months of a recovery and can promise high returns (but I repeat again, this is risky).

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