Did your domestic help give you a stock market tip - mostly a Buy - recently? Not yet? Don't you worry! The day may not be far.
The crazy bull run currently on in the Indian stock market is such that the old saying, “It is time to sell when a rickshaw puller gives you a stock market tip” may be worth remembering. We are not there yet in India, because, every time there is a boom, there is somebody telling you those magic five words: “This time it is different”. Who knows? I have seen booms come and go and the end is almost always difficult to predict.
Nobody told you three months ago that coal prices will zoom and there is a shortage of that fuel. We were all so busy backing solar energy and renewables with a feelgood mood. Oil prices have shot up in the past few weeks, but most popular analysts did not see it coming.
Those know-all analysts who are always telling you about the future that they can’t really predict will get their salaries – but real salaries and real savings of India’s middle-class savers may go for a six (like India’s opening match in the T20 World Cup last month).
You see, I worry for small investors, especially those out to bet for the short-term, confusing their punts with real investing. I have been there, done that, and lost some money as well, though I have erred more on the side of prudence that confidence.
We are now in the middle of a frenzied boom in the stock market, and the seemingly best part may have a downside because first-time entrants to the stock market are rising in dizzying numbers. And they don’t know what they don’t know.
I saw a funny Instagram post this week by a woman who shared a video showing an irritated expression – saying that is what it feels like when her husband discusses shares at 6 a.m. Not so funny if you think about it. Apart from marital relations, this could potentially harm financial conditions.
But invest you must. So where do you find the balance? There are very good advertisements from the mutual fund guys and the Reserve Bank of India between snatches of questions by Amitabh Bachchan on Kaun Banega Crorepati telling investors to be prudent. But I also see ads nearly everywhere about stock trading, cryptocurrency or foreign exchange trading platforms. They loudly advertise the joys of investing made easy because you just have to follow their tips and press the Buy button.
I want to grab the collar of the people they are seducing into new-age gambling and cry into their dreamy ears: “Finally it is YOUR money you are betting with, dude.”
Seriously, the ads by the trading platforms can seduce desperate middle-class newbies more than our cricketers advising them caution on behalf of the regulators.
I just don’t see much of a difference between betting on IPL matches and taking stock trading positions based on trading tips (not sound investment advice, thank you). The first one is illegal, and the second one is not. And the guys and gals putting their money into the second are likely to be more knowledgeable about cricket prospects and pitch conditions than on stocks and indices they are sinking their funds into.
India’s equity markets have seen a mammoth entry of first-time investors. The number of investor (Demat) accounts with the Central Depository Services (India) Limited more than doubled to 46.4 million in September from 21.2 million in March 2020, when the Coronavirus made a big impact on the global markets.
Okay, you may think they may be buying bonds and mutual funds. But consider the fact that the National Stock Exchange has seen 5 million new investor registrations in the five months to August, accounting for 62.5% of new investor registrations of the 8 million seen in all of the previous fiscal year. NSE means stocks, mostly. You get the drift.
Where is all this going to end?
Stock trading has become easy like WhatsApp messages and TikTok videos because of the same technologies at the core of it all but the financial losses from trading look more real, though psychologists may worry more about the latter than the former.
What we need is a culture that prepares policy-makers, regulators and generally concerned citizens about trading responsibly. And this needs policing. The fine print of caution at the bottom of the ads or alongside video commercials has a limited impact (Make that no impact). Regulators need to openly speak up against crazy tip-based short-term trading.
Yeah, right. The folks who are taking trading tips have enjoyed watching Scam 1992 on Sony LIV about the rise and fall of the stock market’s fallen angel Harshad Mehta. As one who was watching it all from close quarters in the heady 1990s, I can tell you that investment lessons are not easy to learn.
What I would love to see is not just ads from SEBI, RBI or the Association of Mutual Funds of India. Like in the case of fake news, we need tip-checkers much like fact-checkers. We have to make sure that trading platforms do not end up as new-age drug peddlers.
When the cows come home, administrators will be blamed, not the peddlers. We are like that only.
The author is a senior journalist and commentator who writes and speaks on thought leadership issues in the fields of political economy, governance, business and culture. He has worked for The Economic Times, Reuters, Business Standard and Hindustan Times in a long career covering these issues. He is on Twitter as @madversity