UNDERSTANDING PRICE TRENDS

Thursday, January 21, 2010

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In the stock markets, prices are fixed by the interaction between buyers and sellers. The price of a share at any given moment of time depends upon the relative pressures exerted by the buyers and sellers of that particular share on one another. The balance or point of equilibrium reached between these two opposing pressures is the price at which actual transactions take place. Price, thus, represents the point of agreement reached between buyers and sellers.

Price movements are caused by variations in the strength of buying and selling pressures. If the buying pressure increases, the equilibrium is upset and the share price moves up to a higher level where a new balance is struck between buyers and sellers. The price of a share at any given point thus represents only a temporary equilibrium between buying and selling pressures.

PERFORMANCE OF INVESTMENT EXLPERTS

All investment experts have one thing in common: they are all veritable storehouses of information and knowledge on the economy and the corporate world. However, not all of them have the required analytical abilities, foresight or wisdom to use this information to make the right investment decision at the right time. As a result, it would be difficult to find an investment expert who does not make at least a few major blunders every year. Even great thinker and visionaries have been known to lose their reputations in the stock markets. John Maynard Keynes, the towering economic genius whose ideas gave birth to the IMF , the World Bank and the concept of deficit financing, failed to anticipate or understand the greatest stock market crash in history. He mistook the collapse of the U.S. stock market in 1992 for a “bull point for world prosperity”. However, despite this spectacular and widely-publicised blunder, he had an enviable and consistently successful record as a stock market investor. He not only made himself a fortune of several million dollars, but also deployed the fund of his college in the stock market and multiplied them ten times over. If Keynes could make a blunder, then no investment analyst can possibly hope to be infallible.

WHY FOREIGN INSTITUTIONAL INVESTORS WANT TO INVEST IN INDIA ?

Friday, November 13, 2009

Affluent countries have an abundance of surplus capital, a natural consequence of prosperity. As countries get more and more prosperous, their markets get saturated and the demand for capital diminishes. As a result, supply of capital exceeds demand and capital therefore tends to fetch very low returns.

In under-developed and developing countries there is a dearth of capital. As a result, the supply of available capital falls far short of the demand and capital thus fetches a very high return. developing countries have a huge potential for growth and a large pent-up demand for goods and services. When inter-country barriers and restrictions on the movement of capital are removed, or eased, then capital tends to flow from the affluent to developing countries so that it can earn higher returns. These capital flows can be in the form of loans, direct physical investments or portfolio investments.

Under normal circumstances, a major chunk of surplus capital of USA, Western Europe and Japan would have flowed to China and Russia. But these countries doesn't have have developed stock markets and therefore cannot absorb large foreign portfolio investments. These regions will no doubt, attract heavy capital inflows in the form of loans and direct physical investments, but the major chunk of foreign funds earmarked for overseas portfolio investments will eventually find its way to the Indian stock market. The Indian stock market offers really viable and practical option for portfolio investments to foreign fund managers. the major stock market boom in India will,in all likelihoo, be fuelled by foreign institutional investors.