Panic Selling & the Retail Investors

There seems to be a panic selling in the world markets for the past 10 days. This was seen in Indian bourses this week, particularly on Friday (18th Jan). Sensex and Nifty down by more than 8% for the week.

Most of the momentum stocks were down by 5 - 20% on Friday alone leaving the retail investors bleeding in the bourses. The Indian markets were very positive in the New Year week, where all the world markets were reeling under pressure, because of the possibility of recession in US. Now it is almost confirmed that no country can escape from a slowdown in their economy if US goes into a recession.

People are telling a number of reasons for the downfall of India bourses for this week. One such reason is the 2 mega IPOs opened this week. One is Future Capital which closed on Wednesday and the other Reliance Power which closed on Friday. Remember Reliance Power is the biggest IPO in India so far which raises money more than 3 billion $. But retail investors would have squared off the position early this week to be ready with the money for the IPOs. The real reason behind the Friday crash is the FII selling witnessed. There is a real trouble now of US recession and the world slowing down. So investors are booking the profit at the high levels of Sensex and Nifty. Those who are affected more are clearly the retail investors who came into the markets when the markets boomed during Nov - Dec 2007. They will be in real trouble as most of the stocks plunged this week. Some stocks are in their 3 months low and some are even in theri 52 week low. Its the retail investors who donno what to do in such a situation where the momentum stocks plunged in a range of 5 - 20% which is a heart break for small investors. It is these times which make small investors to burn their fingers and make a bad image about the markets a whole among the retail investors. Its better be out of the markets next week - which will give a clear picture for the weeks to come till budget. Remember even the good results from IT stocks didn't help the IT stocks to stop their fall to their new 52 week lows. Clearly the big thing to stop and watch is the Budget - 2008.

It is now obvious that retail investors will try to involve in a panic selling next week wherein there is a chance for a bottom fsihing by the operators and FIIs. So the real game begins next week and there is a chance for rise in Indian markets on the run up to the Budget which is due on Feb end. So its a risky bet for retail investors now.