Stock market is a complicated web and the stock prices fluctuate under pulls and pressure from different directions. A thousand mad trains run in all directions, and many times, you miss the train that you intend to catch. Profits become the mirage. Conditions in the local market and those in the global market have the telling effect on the prices of shares. Let us have a look at the present condition in India and how it is likely to influence the share prices. This situation can be true of any country. As you are in the know, the share market has the habit of baffling all, including the experts in the Finance Ministry and brainy analysts with the Central Banking Authority of a country.
For the quarter ending June 2010, India’s GDP growth has been the fastest. It is an encouraging trend as compared to the corresponding period to some of the countries listed below.
The above mentioned growth of India has been a record performance as compared to the figures of last three years. Excellent manufacturing activity on the industrial front and good farm output are cited as the reasons. In the background of slowing global economy, performance by India, Asia’s third largest economy, is a creditable performance.
Here is a plus point for the investors and for the share market analysts to do brisk calculations and revise their projections and paint a hopeful picture.
But, think of the other side. The GDP show is encouraging, but is that everything? It is one of the ‘mad trains’ on the stock market track, as far as share prices are concerned. Good production is one part of the economic activity. What is important is the demand from the consumers. If the stocks pile up, inventory could be a problem. The industrial, services and agricultural sectors have done well and are looking good, but they all must stop at the door of the consumer, if he is not willing to extend a cordial invitation to them. Domestic demand and global slowdown will leave the tell-tale marks in the growth of the coming quarters. The growth pace is unlikely to be maintained.
The common man, mostly those belonging to the middle class, occupies the centre-stage again. Depressed performance in household expenditure is observed. The investment portfolio is also not encouraging. Central Bank is inclined to revise its earlier stance of its plans to raise the interest rates.
The effect on the equity prices is seen due to the confusing state of the economy. The stock market is behaving volatile. The growth in the domestic demand is discouraging. Private consumption slumped. Fixed investment dropped sharply from 3.7% from 17.7% as compared to the previous quarter. Government consumption showed the negative growth. Export and import figures also show the declining trend. The growth in the supply side may create more problems with stocks piling up.
Here is an example, where the analysts of the share market will have to think deep and an investor has to be on the guard about protecting his portfolio. This holds good for analysts all over the world in all stock exchanges. Analysis is not simply a jugglery of figures. The sixth sense of an analyst plays the important role here.