Watch out for the landmines
Red is the colour traders and inverstors don’t like. It was January 2008, every investor was happy. All the stocks were at life highs, all IPOs oversubscribed, huge volumes in derivatives and day trading. There were even news articles suspecting terrorists’ investments in Indian markets. All of a sudden, the land mine exploded. Its name is FII.
My experience with the stock market is very less, I understand the situation this way.
Recession in the US might have forced millions of people to withdraw their savings from mutual funds. Fund houses and banks are already hit by sub-prime and where will they get the money to cover losses and to give back to the investors? They should withdraw their investments from the markets to get money. So, the obvious target is a market like India, where there was an excellent bull run and they might be in profits in almost all their holdings. There the landmine is, the FII investment in India.
“Unless you can watch your stock holding decline by 50% without becoming panic-stricken, you should not be in the stock market.” -Warren Buffet
I read a wonderful article in ‘Dalal Street’ – The ticking bomb called FII. According to them, the FII investment is about Rs. 6 lakh crore. Even if the FIIs pull back a portion of this huge amount, there would be a sharp dip in the prices of stocks. That is what exactly happened. Prices of some stocks touched the sky when FIIs showed interest in them. And they are hit badly when they sold them.
I think the worst is not over yet. If more FIIs decide to sell off, we may see worse sensex levels. Investors, be cautious. Don’t chase a stock just because FIIs have invested in it.
“Be fearful when others are greedy and greedy only when others are fearful.” -Warren Buffet
It’s the time to buy stocks. Buy, buy, buy, just stocks.
