Sensex Falls On Paanwala Earnings Fear

Monday, 09 June 2008 16:54

Written by essbee, onion uttapam news

Billions of rupees are being wiped out from Indian stock market today on fears that Paanwalas all over the country are making losses. All the major stock indices are in the red and losing further ground as this report is being written. Concerns over the declining profits of paanwalas has reduced investor confidence, pushing the Nifty-50 index below the previous 2008 low of 4448.50. The sensex has dipped below the 15000 mark and there are fears in the market that it will fall further on rumors of declining profits of vegetable vendors, paav bhaji stalls, cobblers and beggars.

"Paanwalas are a barometer of the strength of Indian economy. The poor Q4 results of Daya Ram Pandey Paanwala has shaken the confidence of FII's and domestic investors and there are fears of a trickle-up effect" said Nimesh Kampani, chairman of JM Financial Services. "The poor sales volumes of Paanwalas for last six months indicate trouble. If this trend continues, soon grocery shops, cloth merchants, wholesalers, small traders and other small enterprises will show falling profit margins. There are worries that this trend will trickle up and effect small, mid-cap and large companies"

2008 has been a very bad year for Indian markets. All sectors of the economy are doing badly or rumored to be doing badly. Last week, media stocks fell by 5% on fears that Indian news channels have run out of sensational murders to keep the viewers glued to their TV screens. IT stocks have been down in the dumps since last last year not only because of the declining dollar but also because Facebook has made it cool to be a nerd in the US, resulting in millions of Americans becoming ready to accept IT jobs at rock-bottom salaries. Realty stocks have cooled down from the dizzying heights they reached last summer, after prospective home-buyers (mostly from the IT industry) suddenly started worrying that if desperate Americans start coding at rock-bottom salaries, who will pay them salaries high enough to pay for their bloated monthly home loan installments. Pharma stocks have been unable to rise and couldn't keep pace with the rising sensex last year, ever since Swami Ramdev started teaching millions of Indians how to breathe in and out free air, instead of expensive drugs. Textile stocks too failed to join the party last year because global warming and rising mercury levels all over the world led to a drastic fall in demand for clothes and apparels. Sales of bikinis increased by over 30 percent, but Indian textile manufacturers and exporters failed to take advantage due to lack of adequate preparation.

"We are in deep, deep trouble" admitted Amrish Mishra of Karvy Securities "Officially, our GDP is growing at 9 percent. But we all know that half of that is being cornered by the Ambani brothers who have their hands in every pie. Officially, our inflation stands at 8.4 percent. But we know that unofficially prices have gone up by 15 to 25 percent. Bad results by Daya Ram Pandey Paanwala have confirmed our worst fears - that we are actually staring at a negative growth rate."

So are we officially in a bear market?

With the sensex currently down by over 25% from its January 10 peak of 21,207, is the market entering a bear phase? Analysts are divided on the matter, unable to come to terms with the fact that their prediction of long-running bull market has not come true and unwilling to accept that we are finally in a bear market.

According to one analyst, we are neither in a bull nor in a bear market but in a dog market. "Like a loyal dog who follows his master wherever he goes, our markets follow US markets all the time. We will rise or sink along with DOW or Nasdaq." predicts Preetam Mukhi, analyst at equitymaster.com

Another analyst, Rakesh Mitra, CEO of Globus Funds, feels we are not just in a dog market, but in a stray dog market. "Like a stray dog who has no master, but latches on to anyone who throws him crumbs of food and starts perceiving him as his master, we are dependent on the foreign institutional investors for the liquidity and strength of our markets. Now that the FII's are withdrawing and have stopped feeding us crumbs, our markets have become starving stray dogs"

Whether we are in a bull, bear, stray dog, cow or elephant market, one thing is clear - With such volatility and with prospects of improvement in sentiments diminishing, retail investors, unable to bear frequent shocks and tremors are preferring to stay out and becoming extinct by the day. For them this market may well become a 'Tiger Market'