Optimistic & Pessimistic Market
There might always be a situation when you will feel to be Optimistic and surely be Pessimistic in some other situation but what if being Optimistic or Pessimistic was not your choice!!!🤔
So I will be highlighting these terms and facts concerning the current market scenario. Being Optimistic here means that you are bullish about the market that along with the growth and increase in the share market and economy your investment in markets will also grow.
But Pessimistic is the other side of the coin means being bearish about the market, you will be in a state that the current market is overvalued and they will fall along with the fall in the economy.
But wait did you decided it yourself or someone else decided it for you? We all have a habit to read articles, check out news and updates daily so can I say that it's not your decision but the decision which you took ( Optimistic or Pessimistic ) was mainly based on these entities/materials which you had referred to as a reference.
The same thing is happening currently in India, with a strong bull run ongoing and investor minting hell a lot of money. But I personally think that the truth is really different from what it is showcased and today I will be showing you some proofs and solid reasons for this claim which I am bullish about.😀
- Mutual Funds Heavy Sell-Off
In the above image, you can clearly see that there is a consistent sell-off from the mutual fund houses from the past 6 months. But still, markets are not reflecting this sell-off due to heavy buying from the foreign portfolio investors (FPI’s) in a big way with the highest-ever net inflow of Rs. 1.4 lakh core in 2020.
So the domestic players are finding the market very costly but it's the foreign investors who are pouring money like water to keep the levels up and gear on the market. I can clearly say that this is a big bubble and one day when the bubble bursts out there will be a blood bath.
2. Neglecting The Informal Sector
The Economic Survey of 2018–19, released on July 4, 2019, says “almost 93%” of the total workforce is ‘informal’. But the Niti Aayog’s Strategy for New India at 75, released in November 2018, said: “by some estimates, India’s informal sector employs approximately 85% of all workers”.
As we can clearly see that with such a huge number of people employed in the informal sector, the markets are clearly not reflecting the hardships and the challenges which are still faced by them. We can’t neglect them and how much we will neglect them because almost 90% of their income has been vanished.
Many have lost their lives during migration, many are living on a packet of biscuits and many are dependent on the help and food supplies from non-profit organizations. So if their conditions and real scenario are reflected the market might not have been running like a hell.
3. India Is Currently In Technical Recession
First, let's understand what is this so-called “Technical Recession”
A technical recession is when a country faces a back-to-back decline (for two consecutive quarters) in the GDP. It covers a wide range of decline in economic activity, covering several economic aspects such as employment, household, corporate incomes and so forth. It is mainly used to snapshot the trends in GDP.
And why is a matter of concern is can be understood by a simple example: Let's suppose Mr. X had Rs.1,00,000 and he invested it in the market where he was getting a variable rate of return but always positive means his investment was growing. Now after a few years, his investment grew to worth shipping Rs. 2,00,000 and the average rate of return were let’s suppose 5% quarterly and now he had expected it to continue further also but suddenly he got 2 times negative return -23.5% and -7.5% in consecutive quarters.
Let’s do some Maths here: 23.5% of 2,00,000 is 47,000 so now he has only Rs.1,53,000 left again second loss so 7.5% of 1,53,000 is 11,475 so now he has only Rs. 1,41,525. So clearly we can say that he first needs to return to his original level of Rs. 2,00,000 then only he will be growing further.
The same is the case with Indian GDP as India first needs to return to an original level only after that we can say that we are growing and it is estimated that it will take almost 2 years to reach the original levels so not only we lost the growth but also the time and still, we will be at the same level as probably where we were in 2019 so a clear loss of 3 years (1 current and 2 more to recover) and also the growth which we might have achieved during this 3 years is a clear heavy loss.
4. Big Companies Acquiring The Small Companies
Due to the current market scenarios, small companies are running out of cash so the only way out for them is either they go out and ask for funding or get acquired from the big giants. Although it's in a way the last and best step they can take to save the company and its employees but mostly what happens is that giants are taking the advantage of the situation and taking all the favours towards their side so they are into hunting down these small players.
Below is the list of only a few handfuls of deals happened till date in this pandemic:
Tech Mahindra Acquires Zen3 Infosolutions
Cisco’s Acquires ThousandEyes
Apple Acquires Xnor.ai
Intel Acquires Moovit
Microsoft Acquires CyberX
Zomato Acquires Uber Eats
Ebix Acquires Yatra
Reliance Acquires Embibe…..etc
Now another thing that is wrong here is that it allows the “monopoly market” to take place. And when these monopoly markets will emerge the ultimate loss is to the customers who are going to acquire these products from these giants.
5. Money Is Only Circulated, Where Are Profits?🤔
To explain this point I will give you my personal Example. My father owns a ready-made garment shop so I always go during the Diwali festival season to help him with the work in the shop. During this season for the first time in my lifetime, we were offering the sale in the Diwali season of “Buy 2 Get 1 Free”. So the sale did go well and we got a good collection of money but the issue here is we were at the least profit or can say no profit no loss stage.
But you might be thinking why so? The reason is pretty simple due to sale the customers did bought the cloths but we also gave 1 free cloth on 2 cloths so we barely made in profit and thus at the end of the season we were at a stage where we can rotate the money i.e. give to the merchants from where we had bought the stock of cloths, paid salaries to the employees and other expenditure.
So although the GST collection might have increased as claimed by the Indian Government, it's only due to such sales from the merchants like us who had to put it due to weak demands and depressed market situations. So the real thing out there to be noted is that the money is just circulated i.e we took from customers paid to our merchants but somewhere the share we used to get is missing this time so the things aren’t any time well.
I hope you might have got some idea about why I am concerned in this situation and also its high time so you also become self-aware of it.
Do check out my articles on Market Investment Tips: https://umangthakkar005.medium.com/market-investments-tips-part-1-55c9756392ed
https://umangthakkar005.medium.com/market-investment-tips-part-2-8fabf684f173
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