Ten thousand & counting

A little over two years ago, when the markets first shook-off their Ketan Parekh-induced scare, the collective notional wealth of investors in the Indian stock markets was around Rs 10 lakh crore.

A little over two years ago, when the markets first shook-off their Ketan Parekh-induced scare, the collective notional wealth of investors in the Indian stock markets was around Rs 10 lakh crore. Today, investor wealth has topped an astonishing Rs 26 lakh crore. The conclusions are obvious. The Indian capital market has come of age, with the BSE Sensex becoming the first developing nation stock index to trade at over 10,000 levels. While it is certainly right to say that most investors have made money in the markets, it is equally apparent that several have not. Both ‘time in market’ — the length of time one stays invested in a market, as well as ‘timing in the market’ — knowing precisely when to enter or exit the market or a particular stock, are both critical to success.

HT Image

Warren Buffet once famously pointed out that the “the right time is when a great stock is offered at a price that will produce the return I want”. Whether it was short, medium or long term, or whether the market was rising or falling was all irrelevant, he argued. The key is return on investment. On that score, Indian markets have performed quite well. The Sensex’s heady climb has been largely fuelled by huge inflows from foreign institutional investors, drawn by a booming economy, the availability of quality stock, a resilient corporate sector that is managing to take on global competition and post-handsome profits in the bargain and, above all, by great returns. Domestic investors have been somewhat slower to follow suit, although that, too, is rapidly changing, encouraged by an increasingly investment-friendly tax regime.

But remember, market valuations are perception-driven and do not necessarily reflect ground reality and current prices are always discounted derivations of future expectations. For these to be met, the government has to ensure that its policies and actions enable and sustain growth. Yes, the Sensex has joined the global 10K club, but we’re not the Dow Jones yet. That will happen only when the rupee becomes fully convertible and all sections of Indian investors get an equal chance to invest their monies in any global market of their choice and still choose India.