Market Hype Fades, India’s Reality Check Arrives

In an interesting column published in Mint this week, Sandeep Das, a former management consultant at PWC, pointed to the problem with finance influencers misleading India’s youngsters. The article highlighted that headlines such as ‘How I Made Rs 5 Crore In One Year’, target the insecurities of the younger generation, pushing them to speculate in the stock markets. Das wrote that influencers tap into multiple emotions such as fear, anguish, FOMO (fear of missing out) and even ridicule — “Do you still invest in fixed deposits?” — to influence young investors.

Speaking of fixed deposits, it's a good time to bring up the report by the regulator Securities and Exchange Board Of India (SEBI) that highlighted that 9 of 10 individual traders lost money in the F&O market in 2024. So you would have been better off putting your money in a fixed deposit or even under your mattress, that’s only if you had the cash to start with and did not borrow it off a buy now, pay later app.

Party Over

Thanks to influencers or otherwise, millions of youngsters have likely lost their collective shirts in the last few years. The precise impact may never be very known since the losses would be absorbed by families or longer loans. The outlets are many. People would have also lost money in cryptocurrencies or crypto trading. Others have lost and will lose money in the stock markets, for some it will be because they may not have the patience to wait for the markets to recover. Of course not all who have lost out are youngsters.

Some may lose higher amounts of money because they borrowed to invest and the interest rates are high and get compounded with delays. Whether it was for a now distant holiday or a high-priced smartphone, the true cost of money will be increasingly felt now. This was partly triggered by incomes not having kept pace with aspirations.

Today, for a variety of reasons including regulatory actions, the party is ending or at least shrinking. Staying with the markets, it is clear that smart stockbrokers feasted on the general ignorance by creating content and luring more unsuspecting young users, through a pliable and amplifiable social media system. They continue to do so, many of them barely having seen a single full market cycle themselves.

While the SEBI has woken up to the prospect of regulating the many get-rich-quick advice dispensers, not all are covered, including the stock brokerages, large and small. This is a good time to take stock, quite literally.

Time To Find The Real Story

When markets rise, as they did in the last few years, making money feels simple and is the equivalent of throwing a dart at any random point on the dartboard knowing you will hit a bull's eye. Smart investors wait precisely for moments like this.

Foreign portfolio investors saw the writing on the wall in late September when they realised companies were not going to turn in good results and that earnings-driven growth was going to fizzle out. Not surprisingly they have sold close to $11 billion by now. The amount is not large in proportion to their holdings which must be close to $800 billion or more, but it is the strategy that is noteworthy.

As foreign investors have sold, Indian investors have continued to pump money, including substantial amounts through mutual funds. Not that Indian savers or investors have many choices in a high-inflation environment. Hopefully, the 8% correction which could go to 10%, if I go by some market strategists, will make us pause and think again about what it takes to make money.

While external factors like the US elections have some role to play in the medium to longer-term economic outlook, it has little to do with small cars not moving out of dealerships or the low-cost housing sector not doing well. We should try and find the real story and not get swept away by the storytelling.