Booming SENSEX Vs Indian investors

Economic, political or social factors have always made stock markets around the world to be an unstable and volatile place for investors. Even the indices of the developed countries have become unstable places for investments. But do these really affect the long term expectations of the investors? Will they expecting better returns? Or do they fear to invest more?
“The rather steep rise in the Sensex sometimes surprises me, sometimes worries me. I don’t think the fundamentals change so rapidly from day to day.” Finance Minister Mr. Chidambaram said. It has been assessed that the Sensex is driven by copious flow of funds from a number of sources abroad. The changing scenario in these financial markets also will have a strong effect on the investors in the market. This will affect the mental strength of an investor who is investing in the capital market. The confidence of the investor in the market and his expectations from the market too would be affecting with these changes.
FII's are pumping more and more capital to the Indian equity market. With stocks markets breaching new milestones every few sessions, inflow of funds from FII's is unlikely to take a U-turn, global rating agency Standard and Poor's reported. "The current macroeconomic scenario is sustainable and the likelihood of reversal (of capital flows) is very low and at this point almost non-existent," S&P Chief Economist (Asia- Pacific) Subir Gokarn said.
An ordinary investor is a person who turns his day to day savings to the capital market. His perception about the capital market too need to be considered. What does he expect from a rising SENSEX? Is he expecting a rise in his investment or is he fear a correction? It is related to the field of behavioral finance. It can be considered a helpful supplement to classical financial theory, which currently dominates financial analysis and academic research. This field considers psychological factors as an important input to financial analysis and decisions, and is gaining increasing momentum in academic research and practical applications throughout the world. Behavioral finance can help to explain many reactions in financial markets that appear to be contrary to conventional theory. It can also make important contributions to help avoid serious mistakes, and it can help in the development of investment strategies.



Posted by Market Watcher at 6:08 AM 0 comments Links to this post
Labels: capital market

Current Indian Scenario

Indian stock broking industry is growing at a high pace. It now offers wider range of products. Also corporate memberships is growing and the scope of functioning of the brokerage firms has transformed from that of being a family run business to that of professional organized function that lays greater emphasis on observance of market principles and best practices. Emergence of online broking enabled reduction in transaction costs and costs of trading. Keen competition has emerged in online broking services, with some of these offering trading services at the cost of a few basis points or costs which are fixed in nature irrespective of the volume of trading conducted. A wide range of incentives are being created and offered by online brokerage firms to attract larger number of clients.Also there are some major challenges that are being faced by the stock markets. The industry itself is highly fragmented. Also Capital adequacy has emerged as an important determinant that governs the scope of business in the financial sector. Broking has become international in character with the stock markets being open for domestic and international investors. Surging markets and growing opportunities will attract a number of international firms that will increase the pace of competition. Global firms with higher levels of capital, expertise and market experience will bring dramatic changes in the brokerage industry space which the local firms should be able to absorb and compete. Also it is important for brokerage firms to establish strong and streamlined systems and procedures for ensuring investor safety and protection. Firms found not having suitable infrastructure and processes to ensure investor safety and protection will encounter constraints from regulation as also class action suits that investors might bring against erring firms. The nature of penalties and punitive damages would become more severe.

Posted by Market Watcher at 6:08 AM 0 comments Links to this post
Labels: capital market