Indian Stocks- need of the hour –“News fasting” for analysts and investors

There is an upbeat mood on the Dalal Street. An air of newly found optimism today took India’s BSE Stock Sensex to fourteen months height, since July2011.Retail investors are reluctant to accept the mood as unidirectional and continue to hold the view that you trade what you see and don’t trade on what you hear.

 I am of the view that the retail investors’ struggles to find balance in these headline reform measures. There is drought in stock ideas and investment themes for retail investors.  Retail investors are confused with the sudden change in the government’s passivity outlook towards to big ticket reforms.  An image check of the market mood may one find in when a man is suffering from the effects of cobra-bite, they give him chilies to chew; the idea is that the ailing person will not feel the spicy taste, if the poison is still in his system.

Forced by‘coalition dharma’ recently government announced series of steps to improve its macro balance sheet numbers like hike in diesel prices, cap on LPG supply, opening up of foreign direct investment in multi-brand, retail and DTH services and the 25 basis point cut in cash reserve ratio announced by the RBI in its mid-quarter monetary policy review further aided the euphoria in the market sentiment.

Foreign Institutional Investors (FIIs) investment in the country’s equity market has reached Rs 65,954 crore (about $12.81 billion) so far this year. Overseas investors pumped in nearly Rs 3,000 crore in Indian stock market in the past two weeks on hopes of government initiatives on policy reforms and easing of monetary policy. To keep of momentum going the Finance Minister’s statement today that the Centre will roll out more fiscal correction steps between now and October 30, buoyed further the trading sentiment. This has successfully changed the market mood for day trader’s delight!

I strongly behold the view that the headlines inspired rally may not succeed in changing the perception of the retail investors’ mood. I really doubt over the implementation of these measures and a long way to go. This may change temporarily the stock market looks that was unkempt for months without any investment theme. Perhaps at the most I can think that a great signal to the investing community from the government that no more bumbling inaction.

Increasingly obsessive discussions are on about the nature and content of reforms, market mood and news. Under these circumstances retail investors and analysts should go for news fasting and concentrate on  fiscal and governance balance sheet checks on corporates. It is after all our attitudes only mirror the times we live in. Isn’t?