Most Retail Investors in India are playing Russian Roulette. Are you amongst them?

 10^th June 2022

Most Retail Investors in India are playing Russian Roulette. Are you amongst them?

Dear All,

Namaste! Our last post on the duality of investments and life was well appreciated by the readers. I am sure everybody must be aware of Russian Roulette. For those who are not aware let me tell you – It is the practice of loading a bullet into one chamber of a revolver, spinning the cylinder, and then pulling the trigger while pointing the gun at one's own head. Normally, there are 6 chambers. So, one in 6 chances is there that one gets killed. It is a dangerous game one can play.

What did Mr. Nassim Taleb say about Russian Roulette?

 “Reality is far more vicious than Russian roulette. First, it delivers the fatal bullet rather infrequently, like a revolver that would have hundreds, even thousands of chambers instead of six. After a few dozen tries, one forgets about the existence of a bullet, under a numbing false sense of security.

Second, unlike a well-defined precise game like Russian roulette, where the risks are visible to anyone capable of multiplying and dividing by six, one does not observe the barrel of reality. One is capable of unwittingly playing Russian roulette - and calling it by some alternative “low risk” game.”

Facts of Indian Stock Market: -

FIIs are selling one side and DIIs and Retail guys are buying one side. Most of the time it is the RETAIL buying that is supporting the market. As per some estimates, more than 40% of the money is coming from Retail guys in the market. This is a big flow in the market. The market is able to absorb the selling of the FIIs.

Why Retail guys are so much in the market?

Thanks to COVID LOCKDOWN by our government - we had a BAD year for most of the small businessmen and service-going populations. They kept running the market. Now, the stock market was moving up. So, they diverted their little savings to the stock market in the hope of running their home expenses and making some additions to the capital.

Nifty moved from 8000 in May 2020 to 18400 something in October 2021. Incidentally, we were amongst the first to ask our readers to buy at 8000 on 2/5/2020. You can check our blog for our expertise and vision in the market.

Since the market move up more than 100% in the shortest possible time – the people thought that the market will go to 21000-22000 in the year 2022 and they have made a huge investment of their savings into the market.

Are they playing a Russian Roulette having a 1000 chambers Gun?

Most retail guys are new in the market. They don’t know ABC of the market. They have been told that just buy in the morning and sell in the afternoon when the prices go up. They are operating out of the TIP and since they have expenses to meet – they have some URGENCY to make fast money.

Now, vested interest guys will give them ideas about Futures and Options and other esoteric speculative suggestions. They will make brokerages but this poor fellow will lose the capital of his life.

If you fall into the above category – be alert and take proper help from a professional person. If you try to save on his FEES, you may end up losing your capital.

Who STARTED the GAME?

FED started the game in 2002. They started the easy interest policy and there was money, money everywhere. It led to the market making a new high in 2007/8. When the SCAM broke out – rather than allowing the person to die – they added more chambers in the GUN (Market liquidity) in terms of QE programs.

They kept on pumping the liquidity and the market went up like anything. Indian SENSEX went up 6 times in the last 10 years or so. DOW index moved up from 8000 in 2008 to 36000 in 2022.

Now, they are reducing the BARRELS in terms of increasing the RATES and increasing the inflations. The investors who were assured that FED will come and save them – are not going to be there anymore. (assuming they stick to their stand). With the FED, the whole world is taking the same stand of increasing the rates.

This unwinding will take away the whole money of our small investors who have jumped into the market without any expertise.

Adding salt to the injury is the CHINESE game. They locked down the economy on the pretext of ZERO Covid policy. So, the USA increased the price of money, and China increased the price of commodities. Russia and Ukraine are helping to gain Oil prices. See the international games.

In Gujrati we have a saying when TWO BULLS Fight the TREE gets the most bruises. This is going to be the situation of the small investors for sure.

What NEXT?

I have given you the most simplistic picture of the economy so that normal guys can understand. In reality, it is very serious. All you need is a seasoned investment expert at your service if you want to continue to invest.

If you like our way of looking at the market – you can approach us.

Follow me on Twitter @hiteshmparikh / WhatsApp - +91-9869425399.

Learn a Lesson. Live with Passion & Invest with Reason.

Hitesh Parikh.