Markets and its volatility

Today March 23, 2009 is a good day for Indian markets. Market is up by 457 points. There are no strong reasons for why the market is up? I was following couple of market analysts and all that they predicted at 9.30 am is markets “might” be up and it will have resistance in the range of 200 points, one analyst predicted that it will rise and then flatten out and other predicted that there might not be any major changes. In some time during the noon, the analyst realized that the markets are going up and they changed their sentences as, markets are doing well and it will go up further north. This was a good sign to investors.

I was confused as to how can the analyst change their views within a span of 3 hours or so. Then I realized that, they are also predicting and they can change and people are not so very keen to remember the analyst’s views. They want a solution right then and then they don’t think much about it. I have seen many a times the so called investors call up the so called analyst and ask his expert opinion as to whether to hold the stock, buy the stock or sell the stock and the analyst gives his expert opinion. I have always wondered when they can predict so much and give their views on stocks; they could easily make millions by using them rather than giving it out to the public.

I am sure not many analysts will have their own portfolio, they might advice other investors as to how the money should be invested but when it comes to their own money they will invest in low risk financial instrument. I am not against the analysts or investors. I just want to bring out the point that markets can’t be predicted. It is just random. The market behavior is just like our investors, not sure of anything. As an example, I want to quote today’s incident. Today no major policies were rolled out in India or nothing investor friendly happened but today the markets were up by 457 points. the market Asian markets were performing better. They were all up and I guess that is one of the reason for Indian market to be up but the question is, if other markets do well, will Indian market also be better?

I have noticed many a times that the Japanese market would be climbing up and ours would be crashing down. There were no significant reasons for the same. Analysts say that investors are gaining confidence or losing confidence and all that; but I am not sure how come the investors gain confidence in just a day or two or lose the confidence in a day or two. Isn’t it surprising? Can you gain confidence in a day?

I can’t gain or lose confidence so soon and I assume most of us will be like that. The truth is that markets are just random, no rules apply to it. you can’t predict how the market will be and I am sure if you could have predicted you won’t be reading this blog and instead minting money in the stock market.

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5 thoughts on “Markets and its volatility

  1. Hi Saravanan:

    You hit the nail on the head again! A friend of mine who is a graduate of Wharton School of Management shared the SAME view with me. In fact, all of the statistical models for prediction would be perfect EXCEPT that there is a monkey wrench thrown in and that is human emotions associated with investing. As soon as you bring that in, no analyst in the world can predict anything accurately. Even a stopped clock will be correct two times in a 24 hour period, so sometimes the analyst may turn out to be correct.

  2. Nice!

    So you mean to say that people will read your blog only if they dont make money? 😉

  3. Ritesh says:

    Yes I agree that stock market trends can not be predicted. No pundits / analyists can see the future or predict the market ups and downs. If investors feel a stock is worth buying, they will pour money into the market. If investors don’t feel like buying stocks ( too risky), they won’t! I am amazed how the so called stock market experts make a living!

  4. Saravanan says:

    @Raj : Yes Raj even I think that Human Emotions play a dominant role and that is what causes the turmoil in the markets. Analyst can be right at times. 🙂

    @Shashi : I meant that if someone can predict the markets then I am sure that instead of wasting time reading my blog he will busy making money and not otherwise. 🙂

    @Ritesh : Dude I am sure that the so called stock market experts make a better living than the investors and stock brokers are better than the so called experts. Some investors don’t know when to pour and they seek the experts to guide them and the experts charge heftily and merry on the investor’s money. 🙂

  5. Tess says:

    Reminded me of the book – “Fooled by randomness”. You might enjoy it.

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