The Hindu Business Line : Slaughter of the lambs

The stock market is up and away, soaring to newer heights almost every day. A major correction is said to be "just around the corner," but then it has been ever since it began speeding away from 8,000-levels. At 12,000 and counting, how long can the lambs keep away from what will be, de facto, their slaughter, once the inevitable correction happens, ask market watchers.

Memories of two meltdowns — one Harshad Mehta induced and the other Ketan Parekh triggered — are still fresh in the minds of the wannabe punters what with events such as the recent IPO allotment scam.

But the way the market has shrugged off the regulatory checks yet again and got the Sensex on the double, it appears that the slaughter of the lambs cannot be far too long off.

Historically, these gullible investors have resisted the temptation to play the market till `the opportunity of a lifetime' is upon them. No, they do not quite believe in making a quick buck, but when every one else around them seem to be doing so with ease, so why not have flutter goes the line of argument. The one aspect they are impervious to is that by the time they overcome their reluctance and get on to the market for the ride, others would be just about getting ready to quit.

As Ramesh Abraham, who is determined not to be lured into taking the plunge come what may, reminisces: "I recall the early 1990s when well-heeled young scions from agrarian towns like Thodupuzha and Karunagappalli in Kerala would sell a portion of their inherited rubber and cardamom estates and climb the tiger called the Kochi stock exchange for a ride. By the time they got off, many were reduced to paupers. My own family members were smitten by this bug and burnt lakhs of rupees."With market volatility at unprecedented levels — daily swings of 200 points are not seen as an aberration — nobody can forecast how the long the bull run will last.

However, there is no dearth of advisories from market pundits many of whom are not chary of predicting the BSE Sensex going beyond 15,000 with some of the bolder analysts mentioning such surreal levels as 18,000-20,000 by the year-end.

In a State like Kerala, with huge amounts of NRI money lying in fixed deposits and even savings accounts with meagre returns, a galloping stock market at 15,000-18,000 levels could lure funds into the speculative game that is capital market manoeuvres. As of now, the answer is no, as the scions from places such as Karunagappalli seem to be in no mood the repeat the mistakes of the past.

At 13,000, a few of these no-nonsense guys and gals may take a re-look at their investment options. At 14,000, the peer group pressure to stop fence-sitting vis-à-vis the stock market could get a bit over-powering.

At 15,000 only the saints would keep away and soon enough the slaughter of the lambs would begin. And the story would not be too different in other parts of the country.

Vinod Mathew

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