This article is from a series appearing in the magazine Abhiyan.
Earlier, I have expressed my views on Indian economy, inflation and investments in real estate as well as gold. Now I am presenting a few views on investment in the share market.
Some readers may find these views "radical" and "unacceptable". I will only submit that only people who are interested in deep thinking may find these views interesting. People who are not interested in philosophical thinking may not find these articles interesting.
The articles will cover views on - what is wrong with the share market ; and what is wrong with the investor himself. What may be the basic investment analysis. Having considered these factors, one may plan his strategy of how to take the benefit of a growing share market in a growing economy.
• Greed has overtaken this nation.
• The politicians are on the BIG screen. Everyone reads about them and everyone criticises them.
• But they do not constitute the whole nation.
• They only reflect the nation.
• Most of the investors in India are Greedy.
• A peon investing Rs. 2,000/- ;
• and businessman investing Rs. 2,00,000/-.
• Both want their money to be doubled.
• A Rs. 10/- share should be sold for Rs. 20/-.
• The more greedy want Rs. 40/- or even Rs. 100/-.
• If Mr. A wants 100% return, he is greedy. When he wants 400% return, what can you tell him ?
• No one is prepared to pause and think.
• How can a new company's share be quoted at 100% premium ?
Anyone who has anything to do with business knows that when a new industry is set up, there will be huge expenses on interest, depreciation, and preliminary expenses. Company's first balance sheet has to declare losses. Share may continue to be quoted at par.
RASHMIN PG.NO. 2
There is no legitimate way for the share to be quoted at premium. And no way for 100% or 500% premium.
And yet the investor wants it.
Then what he is bound to get is cheating.
The investors' greed has generated a whole generation of cheaters, forgerers and outright scoundrels to pose as promoters and directors. They promise that their Rs. 10/- share will be quoted at Rs. 40/-. And the gullible, greedy investor believes it. So the promoter issues the share @ Rs. 20/-. He takes in his 100%.
And then the promoter does a series of frauds so that the share may be quoted @ Rs. 40/-.
And we read about these frauds everyday in newspapers. Some news of duplicate shares, switching of shares, issue and purchase of shares at astronomical prices. And we criticise all the cheaters who are named in the newspapers. And then hope to subscribe to a new issue of share of Rs. 10/- ; subscribe @ Rs.20/- and sell @ Rs.40/-. As if the frauds reported in the papers can not happen to us.
The investor is as guilty as the promoter.
All the professionals involved in, supporting and advising any fraudulent public issue are guilty of abetment. If we believe in the principle that "doing, abetting or permitting wrong is sin" ; - then all of us are sinners. And sinners get their punishment.
Swami Ram Kinkarji Maharaj in his lecture at Prempuri, Bombay - in June, 1996 gave an example :
"A trickster comes home and offers to the lady at home to double her gold jewellery. The lady that gives her jewellery to the trickster is as guilty of the transaction as the trickster is. One is greedy, the other is a cheat".
Most people are like hunters. God will grow the forest, he will grow the grass and he will support the animals. Hunter will come in, shoot an animal and enjoy.
Very few are farmers. Those who do hard work, fight all odds and grow the grains.
People want the glamour of hunting. They don't want to hunt the rabbit. They want the lion and the elephant. The poor farmer with his bushels of grains does not attract anybody. They all want 50% and 100% yield if not more. No one is happy with 20% nominal yield or 5% real yield. Some people ask for `tips'. They want scrips which will appreciate at 50% every year. I simply turn silent. They do not want to study. They do not want to learn how to identify and monitor a scrip. I can not advise such people. All my articles will not help such people. But if anyone wants to make a real, long term investment, these articles may, God willing, be of some help.
RASHMIN PG.NO. 3
I always back the farmer. I invest in the industry. I stay away from the hunter. Because long after the hunter is hunted down ; the farmer will still be harvesting his grains.
And hunters, speculators and gamblers do not create wealth. They plunder the wealth created by nature. It is the farmer and the industrialist who create the wealth.
We have the share markets. As if the gambling on the share market were not enough, now the Government wants to start dealing in options, futures and derivatives. They give it fancy name of hedging. It is nothing but gambling at its highest level. It had brought down the 200 year old Barings Bank. Gambling will keep bringing down all who indulge in, abett or permit the gambling. May god help people stay away from it.
If India is to be saved from these disasters, options, futures and derivatives should never be allowed in this country.
Amidst all this insanity, we need a few people whose legs are firmly on the earth. Whose values do not change because of any reasons. While few honest individuals are important, it would be more helpful if there were a few institutions which would stand up to this test.
When a man is greedy, he can not see certain plain facts which an ordinary - non-expert man can see. I end this article with a hope that India will have a vast number of investors who are not greedy and hence can see through the frauds perpetrated in the share markets ..........