How much damage can someone's word cause? I would say significant, especially with negative market sentiments, just a small push can be reason enough for panicky investors to sell. This push comes in the form of false rumors or negative news injected. Often such news is baseless and a result of word or mouth conversations. But the kind of damage this can cause is realistic.Rumors of ICICI Bank expected to book huge losses due to forex derivatives and exposure to Lehman Brothers resulted in the banks market cap being eroded by more than 11% in a single day. Customers started panicking and rushed to their nearest ATM to withdraw cash and many rushed to the bank demanding closure of their accounts and withdrawal of all their funds.
I don't blame retail customers and investors for the way they react to such news. In the past 2 hours at least 7 of my colleagues who happen to be rationally thinking management students, have come to me to tell me that ICICI Bank has gone bankrupt. My response to them was a smile. If a management student can buy such news and not even bother looking at the bank's asset base first or cross check the information, then you can very well imagine how a common man would react.
Edleweiss Capital Research which came out with a statement on 16th September that ICICI Bank is expected to book a Mark To Market losses of $200 million, today put a BUY call on ICICI. This is just another example of how news driven the approach to investments is today. Such a statement coming from am equity research company like Edelweiss is disappointing.
Some facts about ICICI Bank:
The proposed MTM loss of $200 million (assuming that it happens) would come close to Rs 940 crore. ICICI's Adjusted Net Profit for year ended March 2008 stood at Rs 4,112.50 crores.
ICICI's total assets stand at Rs 400,417 crores and its Interest Income stands at Rs 30788 crores
Source: www.capitaline.com
So the next time before buying a hoax, go and check it first.
1 comment:
Alot of these are spread by either the competitors or the larger brokerage houses on purpose. we all know why the competitors would do this. However, a large brokerage house might have traded the company's shares and would deliberately do this for their personal gains thus beating the stock and investors.
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