The future of Indian equity market is not as gloom as it appears. Yes we had a fall of more than 500 points on the Sensex and many of the so called big corporated are reeling under selling pressure trying to gauge new all time low (or 2 week low) as the case may be.
But the story dosen't end here - lets analyze little things. The Indian economy is the same as it was a month or six months ago. No fundamentals have changed that much to have a drop of 50% or so. It just as good a concoted story as the 20k euphoria was.

The reasons - cited are a) rising oil prices , b) inflation, c) global equity crisis (this was supposed to have started with the sub-prome) d) lower GDP growth rate than forecasted.

Let's analyze them one by one:

a) oil prices - read my previous post. Also note that commodities is now at its peak undergoing a boom - similar to the equity market we had six months back. Like all things that which has gone too high will ultimately bust and even out. The question remains when ? Not too far from now - 3 months would suffice.

b) inflation - stupid indexes invented by morons have been used to gauge inflation. Its more of a number game - and some technical junkies use these to defend their statement. All such indices try to measure the inflation are grossly off the mark and many of these does not take into account seasonal changes niether do they discount abrupt price jumps of particular products.
Will post a detailed analysis in my next post.

c) Yes the US had a poor growth may be on the border line of what is defined as quote unquote "Recession". The unemployment rate has risen to 5.5%. But what the heck! Emerging economies provide far better return than the developed counterparts. What if the investment banks & insurance companies sell of in US ? Where the hell will they place that money ? Will they invest ? Yes. Where ? in growing economies and commodities. Aye no more in Gold ... Gold story is gone for the the time being. There you see the cycle - equitues, gold, commodities ...

d). GDP growth does have an impact - but its applicable only to the long term story. The nature of investment of FII is most cases do not adhere to such pronciples.

More to come later ...