If stock Market Reaches 1000, How will India get affected?
Today there was a question posted on our bulletin board that if the stock market bottoms down to 1000 then how does the country "India" gets affected?
Well, in most simple terms the answer is that when people were predicting that market will reach 40000 (just last year around this time) they were doing that because our government was basking in the glory of a 8% GDP growth. FIIs were proud to invest in India and apart from Saas (not the Software as a Service but the mother in law) and Bahu, slowly sensex also caught the imagination of every Indian. Nobody wanted to miss the northbound train actually.
Banks churned out funds after funds, companies making break and gears also diversified into mutual funds. It was so easy those days. You want to start a company and have no money? Great, take a loan, pool in some money from your side, find a venture capital and then bring an IPO after 3 years. The venture capitalist will be out with his share of pie and poor investors like you and me who are so damn excited to become a part of this growth story will be sucked in.
You want to buy a car? Wait, buy Reliance Capital, hold it for 6 months and the money will double and you can buy a better car. Why you are wasting the money on insurance man? Put them into a ULIP and just watch them grow. Need a house? Buy it now because the price is going to go off the roof. See, Mr Sarma bought a duplex for 25 lakhs in Gachibowli (30 kms from Hyderabad railway station and 40 kms from the proposed airport) 4 years ago and he is already asking 1 crore for that. Comeon! what are you thinking? The interest rates are also 7% only on housing loan and you get tax benefit extra.
Okay okay but taking a loan is not an option. So I will sell the stocks that I got as stock options. It has already multiplied like 40 times. Well, so you sell those stocks and buy that dream house/car of yours. Great isn't it? Everything is perfect. You work in a company which has brought it's IPO some five years back and made so much money that it can keep a bench strength bigger than some of the biggest companies we have heard of. You feel that all your dreams will come true some day. The market will reach 40000 and you will sell all your stocks to buy a sea side villa and will spend your day fishing and blogging. Well, that is just not going to happen now. It was so easy to do things. But then it is the beginning of difficult times now.
When things were good there was optimism everywhere. People had hope and they were willing to take risk. House prices went off the roof really. For each Munna having 20 lakhs maximum to buy a house there were several Pappus who didn't mind shelling out a couple of lakhs more and were even willing to make a down payment of more than 25%. "Kyon naa ho bhai, onsite jao aur paise le kar aao" was the mantra. Well stock market gave "wings" to "ambitions" to broadly two kind of people. Those who had the guts went on their entrepreneurial mission thinking that raising money won't be a challenge and those who had money and thought that there will be no dearth of opportunities for multiplying their wealth. Both these kinds feed into each other's ambition. Market was just a medium. It was easy to raise money abroad and at the end of the day FIIs were always there to invest. Roads, Ports, Airports, Airlines, Buildings, Malls, Sezs were all fueling the story of growth and development. Company borrowed more and more, people consumed more and more but then suddenly the money dried up.
The banks are not willing to lend, people are not willing to invest, those who have invested are pulling out their money in fear, those who have made losses will cut down their expenses. Those who had plans to fly tomorrow are suddenly thinking ki "chalo bas 24 hours hee to lagte hain train mein" and suddenly Sleeper Class feels more comfortable than the AC III tier ("suffocation jaisa lagta hai yaar, saari windows closed hoti hain").
Well, what will be the ultimate result? Honestly I don't know and I can tell you that nobody knows with certainty. All I can speculate is that the shopping mall which was being built on the main road to office might get delayed now (there is no construction activity around). Some of my friends who have bought flats might get their possession late. The metro project might also get delayed. You might not be able to withdraw money from ATMs other than the bank where you have your account. You might not see the charming girl living next door after one month (she worked in Jet Airways). Expansion plan of your company might be put on hold. You yourself will start feeling that suddenly you are using geyser too often and you should save on electricity bill. Carpooling is an eco friendly thing and blah blah blah. The moral is that stock market does not exist in isolation. The mall where you shop and the brand which you shop are all dependent on the stock market in one way or another.
Everything is connected.
Well, in most simple terms the answer is that when people were predicting that market will reach 40000 (just last year around this time) they were doing that because our government was basking in the glory of a 8% GDP growth. FIIs were proud to invest in India and apart from Saas (not the Software as a Service but the mother in law) and Bahu, slowly sensex also caught the imagination of every Indian. Nobody wanted to miss the northbound train actually.
Banks churned out funds after funds, companies making break and gears also diversified into mutual funds. It was so easy those days. You want to start a company and have no money? Great, take a loan, pool in some money from your side, find a venture capital and then bring an IPO after 3 years. The venture capitalist will be out with his share of pie and poor investors like you and me who are so damn excited to become a part of this growth story will be sucked in.
You want to buy a car? Wait, buy Reliance Capital, hold it for 6 months and the money will double and you can buy a better car. Why you are wasting the money on insurance man? Put them into a ULIP and just watch them grow. Need a house? Buy it now because the price is going to go off the roof. See, Mr Sarma bought a duplex for 25 lakhs in Gachibowli (30 kms from Hyderabad railway station and 40 kms from the proposed airport) 4 years ago and he is already asking 1 crore for that. Comeon! what are you thinking? The interest rates are also 7% only on housing loan and you get tax benefit extra.
Okay okay but taking a loan is not an option. So I will sell the stocks that I got as stock options. It has already multiplied like 40 times. Well, so you sell those stocks and buy that dream house/car of yours. Great isn't it? Everything is perfect. You work in a company which has brought it's IPO some five years back and made so much money that it can keep a bench strength bigger than some of the biggest companies we have heard of. You feel that all your dreams will come true some day. The market will reach 40000 and you will sell all your stocks to buy a sea side villa and will spend your day fishing and blogging. Well, that is just not going to happen now. It was so easy to do things. But then it is the beginning of difficult times now.
When things were good there was optimism everywhere. People had hope and they were willing to take risk. House prices went off the roof really. For each Munna having 20 lakhs maximum to buy a house there were several Pappus who didn't mind shelling out a couple of lakhs more and were even willing to make a down payment of more than 25%. "Kyon naa ho bhai, onsite jao aur paise le kar aao" was the mantra. Well stock market gave "wings" to "ambitions" to broadly two kind of people. Those who had the guts went on their entrepreneurial mission thinking that raising money won't be a challenge and those who had money and thought that there will be no dearth of opportunities for multiplying their wealth. Both these kinds feed into each other's ambition. Market was just a medium. It was easy to raise money abroad and at the end of the day FIIs were always there to invest. Roads, Ports, Airports, Airlines, Buildings, Malls, Sezs were all fueling the story of growth and development. Company borrowed more and more, people consumed more and more but then suddenly the money dried up.
The banks are not willing to lend, people are not willing to invest, those who have invested are pulling out their money in fear, those who have made losses will cut down their expenses. Those who had plans to fly tomorrow are suddenly thinking ki "chalo bas 24 hours hee to lagte hain train mein" and suddenly Sleeper Class feels more comfortable than the AC III tier ("suffocation jaisa lagta hai yaar, saari windows closed hoti hain").
Well, what will be the ultimate result? Honestly I don't know and I can tell you that nobody knows with certainty. All I can speculate is that the shopping mall which was being built on the main road to office might get delayed now (there is no construction activity around). Some of my friends who have bought flats might get their possession late. The metro project might also get delayed. You might not be able to withdraw money from ATMs other than the bank where you have your account. You might not see the charming girl living next door after one month (she worked in Jet Airways). Expansion plan of your company might be put on hold. You yourself will start feeling that suddenly you are using geyser too often and you should save on electricity bill. Carpooling is an eco friendly thing and blah blah blah. The moral is that stock market does not exist in isolation. The mall where you shop and the brand which you shop are all dependent on the stock market in one way or another.
Everything is connected.
1 comment:
Amazing write up,.
Everything is connected!
ek dam sahi.
This financial tsunami is gobbling up all the good pie that seemed to be up there.
It seems like there is darkness and people are becoming more conservative.
But the most affected would be the poor and the middle class where as the rich would still be comfortable.
Anyways there is always light at the end of the tunnel . so this must come to an end .. end - happy ending.
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