SUDDEN PANIC IN THE MARKET

Investors are seeing sudden panic in the market and the Sensex has come down from a level of over 21000 to less than 19000. So many analysts are giving a strong support at such and such levels and if the market falls below that they come out with a strong support at downward levels.

Various reasons are being attributed to this fall :

1. Supposedly weak international/global cues.

2. Pressing sales by FIIs.

3. Some analysts believe that people are selling off their shares to invest in Reliance Power IPO.

Each of the above may have contributed to the fall. I never comment on anyone's assessment of a particular event. But I have observed one thing, some intelligent investors/operators have amassed wealth by going short on various big shares. Reliance Energy has fallen from a high of 2600 to about 2050 levels and the list is endless. The big operators must have sold at high levels and entered at low levels. In many big shares, this phenomenon is reflected by a lower delivery percentage (26% to 30%) which coupled with huge volumes indicates intra day trading.

But many small investors who have entered in some shares at a fairly high level are a bit worried. We cannot deal with any individual on a case to case basis, but I would like to give a broader future picture :

i) The belief that FIIs can totally dictate the market is not entirely true. Indian Mutual Funds, ULIPs and institutional investment is almost standing equally tall as FIIs and the Indian entities should be able to withstand the onslaught.

ii) Provident Funds have been allowed to invest some part in the equity markets.

iii) The Government's new pension policy will come about any time (it is on the anvil) and this may bring in more funds.

iv) I understand even Post Offices have been allowed to invest some portion in equity markets.

All the above factors put together will keep the equity market up and running. Small investors need not panic at the present fall. I expect the market to stabilise by last week of January or first week of February.

I again appeal to small investors to follow the following guidelines :

i) Invest in fundamentally strong companies.

ii) Do not get carried away by some one else's short term success.

iii)Have a clear time horizon of at least 1-2 years for your investments to fructify.

iv) Last, but not the least, it is your money that you are investing. If you make profit, you and your family will enjoy. If you make losses, you will suffer.

v) Long term investing will always be positive for you.