Filtering Scum from Capital Markets

For the past 11 days I noticed a healthy trend that the Indian capital markets are showing. Most would disagree with me and say that FIIs being net sellers is a negative sign for the Indian capital markets, but I think that this shows the faith of domestic investors in our capital markets. This is the reason why even though FIIs have been net sellers of around $2 billion for the current month so far, the domestic institutional buyers have been net buyers all along.

They realize that these are good times when most stocks are depicting values close to or less than their intrinsic worth. All those who are leeches for the markets will exit now because the Bull of Speculation is not roaring for them anymore...neither here, nor back home. The ones who stay invested right now for the long run will be the true investors the market needs. These will be the ones who will reap the true benefits in the coming 18 months. Kudos to the domestic institutional buyers!!

I am a little concerned with Nifty breaking the psychological barrier of 4000.

Indian Investor Buffoons

What my experience in the markets has taught me is that most of the Indian retail investors in the stock market can at best be termed as "Buffoons". They simply piggy back on a well heard name or a friend's referral and invest in the markets. I personally think that the king of over hyped companies in India is Reliance. Reliance on the basis of its brand name has managed to attract investors even for companies whose current business is running in air and have no full scale operations. Take Reliance Natural Resources Limited for example. The stock is currently trading at Rs 94.60 which is a 440% increase from its list price of Rs 17.50 and all this is based purely on future expectations and no current fundamentals. Another example is Reliance Petroleum Limited which is years away from being operational and is still trading at Rs 157.05 which is a premium of 93% over its list price of Rs 81.10.

Reliance Power Limited is my personal favourite for "Buffoon Makers". As per a research report by Edelweiss Capital Research, the company will start full scale operations by 2017 but is currently trading at Rs 547.80.

I think Reliance ought to come out with a new company "Reliance I Will Start Business Sometime Limited" and I'm sure it will find investors for that too.