MARKET GRAPHS

Sunday, November 15, 2009

All stock market investors dread political instability, war, civil strife, political unrest, insurgency or any other political development that might have a effect on the business environment. These real and imaginary fears give rise to confusion because most of the investors have not developed standardized responses for dealing with political uncertainties. When confronted with a grave crisis of a political nature, most investors tend to panic and either sell too soon, or hold back from exploiting the great buying opportunity created by such a crisis.

However the point to note is that against this dismal record of political and economical problems, and despite strong opposition from entrenched vested interests. India succeeded in pushing through a bold economic reforms program that set the economy back on the path of a strong recovery. Also despite this disturbed and unnerving political scenario of the last ten years, the average Indian investor succeeded in multiplying his capital by 50 times.

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.