Recession in India- Technical and Fundamental Outlook

Practically speaking, some people view the situation as extreme and expect the markets to improve by October 09 or so. But the people abroad are seeing the scenario to end by 2011 ( confirmed by one of my friend in US). Media is projecting that the inflation might slip to negative in the coming months. The growth which was inititally being projected at 7.5%, now the same figure has come down to 6-6.5%. But the question here is what is the authentic means of validating the correct scenario. Is it technical analysis or the fundamental analysis. This is the information what the technical analysis states. Going back to the fundamentals if we see that the demand is shrinking, SLR , Repo rate, CRR have already been reduced. People fear to purchase-many reasons follow-unemployment, rising disparity betwen rich and poor and other things. But the fact remains when there is a supply there has to be a demand to meet that. Both are dependent variables. The growth is a positive projected number as compared to the last year, that means there will be more output than last year. This means somewhere there is concentration of wealth which is happening. Take for eg the PSB's they are offering credit at low interest rates and people are buying it hence pushing the demand, the basics as the price reduces the demand increases. If you can observe a chain between the government and private sectors then u can notice that the demand is high for government commoditites(of any form), the main sufferers are the new entrants, companies with low net worth and some private companies affected by the existing govt rules and regulations ( Porters Model). Since Elections are also ahead, i dont feel that the situation will be in control.its something which cannot be explained by fundamentals. If u see the stock market nowadays its showing a slight boost it is at around 9300. Or we can view the same as a Business Cycle (Economic Cycle) the duration of which has to be seen over a period of time. We are in a trough right now , technical analysis can give an idea of when we will be heading up the sine wave. It has to be done on data and can be analyzed. All these macro economic factors are inter related. When there is so much turmoil which is happening like the oil prices going to a damn low, the gold prices soaring high and others. Probably Multiple Regression, MANOVA can throw some interesting facts.

Is Investing in Stock Market worth it ?

One day I was walking through the road, I realized something strange. I saw many vehicles passing by here and there. After gathering certain years experience of life, human beings walk under the assumption that the people who are driving those vehicles know driving and we tend to save ourselves from such traffic in a way that the other person knows driving. But in fact, we are not sure whether he knows it or not. We do look at vehicles which have a symbol “L” which denotes learner and we become careful if we happen to see such thing. However we do see when walking how much traffic is there and choose our speed and direction and maneuvering accordingly.
Similarly in a business set up when an investor invests his money in the stock market, first he analyzes the company, its growth over a period of time and then invests. When he is convinced, he invests his money and is watchful of any uncertain happenings which may be due to various reasons. But he assumes that the companies will perform in the same way as earlier and will give him benefit. He does look at the management structure, their efficiencies in decision making. But can never be sure how the company will perform in the near future. When investing in a new company, he is further more careful. The investor never knows what is happening at the Top management, how things were managed and do they really know to drive the business. The risk which an individual can take depends on his risk appetite like maneuvering and managing speed and direction, whether he wants to invest in IT stocks or financial services companies etc. These issues are very subjective and resolved by disclosure norms of corporate governance. Though the people making those reports are also from the company, though there are auditors to cross check the same. But these auditors are also human beings and can make mistakes. Then comes the role of SEBI who monitors for all these interests but not all.
Then what is the justification for investing. Is it the risk appetite, the gut feeling of human beings or a planned analysis of the same may be some technical tools or stock brokers who have prior experience in such field? Or is it the greed which forces human beings to invest to earn more in less time with more risk. Then it is a play between risk and return. Then are these investors paid sufficiently for the risk they have taken. Let’s discuss the share yield which is the return which these investors get Share yield is defined as the appreciation in the share prices + dividends received. Now if the share prices are rising there is a return which these investors are getting, but if the investors are getting dividend, then the money added in the reserves and surpluses of the company’s balance sheet will be less, hence less available capital with the company, and then borrowing the capital from debt or equity tools again and again and another cost. But if the investors don’t get dividends, they may notice the company as not performing well. Hence dividends act as a signal of good performance and as the market works on sentiments and fundamentals both, going by the sentiments share price should go up, but when the dividends are declared the share prices go down. Then what is the share yield then?? The question here, is investing in share market worth it?