Fundamentals point to worldwide collapse of Stock Markets
Kiran Chaube
Sep. 23, 2005

Stagflation is rampant with rising commodity and energy prices. The US and trade deficit in conjunction with relentless spending has created the ideal stage for world collapse of economies. If US economy collapses, so will most of the world’s economies.

The signs are also in the stock markets of the developing world. Gold is saying inflation is back. Central Banks all over world is denying the presence of stagflation. India for example is depending on US dollar and Euro by selling the talent of its youth to the West. But if Western economies collapse, India will never have a place to sell the talent of its youth.

Scams are also rampant in the stock markets all over the world.

Indian stock market for example has zoomed up many folds with foreign money influx in the country. The fundamental are missing. The Government denied any scam till they had to reverse their statement and raid the stockbrokers.

The Dow in US is faltering and ready for serious longterm plunge as Gold is at 17 year high.

According to media sources from India, Indian stock market which is the most corrupt in the world may have seen the world’s worst scam.

The driving force has been $8.4 billion of foreign inflows this year--almost equal to the whole of 2004 foreign inflows--and many have been asking themselves when the market would correct.

"At no point of time can a market move only upwards inspite of the best of fundamentals," said Chandan Desai, director at TAIB Securities.

"A correction was due and it is happening, reports of enquiries and broker raids have provided a trigger point," he said.

India had two big stock market booms in 1992 and 2000 that led to scandals and market losses of billions of rupees. In both instances, brokers diverted bank funds illegally to buy stocks and the memory remains vivid with investors and the media.

Newspapers have been speculating all week about high-level talks between government offices and regulators to monitor the market but a government official who did not wish to be named told Reuters on Thursday there was no evidence of manipulation.

The BSE has however taken steps to calm potential market volatility.

It said on Wednesday it had cut the maximum price movement in 850 stocks where trades have to be settled rather than netted off, to 5 per cent a day from varying limits earlier.

It has been steadily moving more 'small cap'' stocks to this trading category in a bid to curtail what it calls ''excessive speculation''. In August, only 660 stocks were in this section.

There are more than 4,000 shares listed on the BSE, Asia's oldest bourse, and authorities have been concerned about heavy volume in low-value shares that were rarely traded before.

Finance Minister Palaniappan Chidambaram has so far been quite relaxed about the breakneck rise, saying last week, when the index was at 8,260, that the rally was spurred by high business confidence.

But he said the markets watchdog Securities and Exchange Board of India, the Reserve Bank of India, and the Finance Ministry were watching for any signs of a speculative bubble.

Desai at TAIB said the market remained in a bull phase.

"The corporate earnings growth rate is intact, the GDP growth story is very much there and the commodities cycle is still good," she said.

"May be some people are manipulating penny stocks but penny stocks contribution is minimal," the government official said, adding however that the regulators were watching the movement in the low-value stocks. The media have been speculating whether regulators were looking at the source of funds of some brokers and whether cash from finance companies and banks was involved.

"We are investigating the source of funds with which the market is moving up," the official said.

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