Bears shine in global equity rout; desi fund houses begin buying

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By S Jha

New Delhi, December 16: Rich men sell when markets are at peaks. Poor men enter markets at peaks. That is the paradox of equity investing. Former Reserve Bank of India Governor Raghuram Rajan’s words on equity markets carry weightage on the international stage, and he explained this irony to former Congress chief Rahul Gandhi during an interview in the course of the ‘Bharat Jodo Yatra’.

Nifty scaled an all-time peak at about 18850, and since then the index is sliding down, pushed further in red by the global events. The US Fed commentary that inflation is not yet tamed, and rate hikes would remain for a longer time frame has hammered the global equity market. The investors who jumped after looking at the indices making new highs are now left in lurch.

Rahul Gandhi had asked Rajan to explain why Bitcoin spiked to a record level and the people began chasing the wild run of the cryptocurrency. “This has been a trend for a long time. The rich men sell at the level where the poor men make entry in the market. The rich men have the benefits of analysis and insights. The poor men lack such analysis before making decisions in investing,” explained Rajan.

His words were immediately reflected in the global equity markets, with Dow Jones leading the meltdown in the equity indices. The Russian invasion of Ukraine is on an extended run, and the experts are commenting that the ongoing war may go like the decade long war between Iran and Iraq in the past. If that turns out to be the case, the energy crisis induced inflation may remain firm for a longer time frame, which could make the prospects of recession in Europe and the US real, with ripple effects in the developing countries such as India.

The tech stocks in the US have been hammered, with the giants such as Apple, Tesla, Alphabet, etc., facing bloodbath on a daily basis. The Indian IT stocks are the most laggard in the current year, with investors losing 30 to 40 per cent of the investments from their respective peak. On Friday, the foreign institutional investors sold Rs 1974 crores in the Indian equity markets. Their domestic counterparts, however, pumped in Rs 1543 crores. This has been a trend as the FIIs buy into a rising market and the DIIs buy into a bearish market. The forex reserve rose by about $2.9 bn to take the Indian reserves to the level of $560 bn, which suggest that there is a healthy inflow of foreign currencies in the country.

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