Watching business TV never looked more comic. Here were these acknowledged brains – global investment strategists, fund managers and analysts making sure-shot predictions of a terrible phase for the Indian markets just a few weeks back. The same people are now back with positive predictions for the indices.
The volte face has been easy for them. After all, alibis are aplenty and public memory is short. But, investors who latched onto every word they said must be feeling directionless and lost. The funny part is that the analysts’ positivity will grow infectiously leaving their followers more despondent.
History is full of such despondent investors buying when it is actually too late. This time may not be very different. But, investors must learn to think independently and objectively. Take the experts view with a pinch of salt. The expert may well be as human and as fallible as you.
The rupee’s movement has been dramatic in 2012. The sharp fall of the rupee during December 2011 has reversed swiftly. Nobody expected this rise and it has caught both corporates and speculators on the wrong foot.
The sharp dollar influx due to FII buying in the Indian stock market saw close to $ 2 billion getting invested in January 2012. Liquidity is impacting different markets and asset prices are seeing sharp swings with the increasing liquidity.
While liquidity can create sharp swings in asset prices, sustaining the prices requires sustained inflows, significant policy impetus and stability in sentiment. The coming weeks will give greater clarity on these aspects.