Precisely the reasons why we should worry about Indian stock markets…

A sustained rally in stock markets and people are out giving all kinds of reasons for its sustenance. Even seasoned pros who have seen boom and bust make the same clamor just to keep the factor going. Dance till the music stops and make sure others dance with you as well.

Akash Praksah chips in to debunk two questions – Are India stocks over-owned? And are they too expensive? He points to how there is so much excitement around India and how this time is different. You know what to do when you start hearing these four words from many a faces.  Replace the article with India in 2007, US in late 1990s, Japan in late 1980s, US in late 1920s. The story is the same.

There is actually a broad feeling in India that somehow stock markets and country’s development are closely related. Not just that as long as former are doing fine, latter is following as well. India is one of those few countries where developments in stock markets have leapfrogged that of real economy many times. The real development is brought about using real resources and finance is just a side-play. I mean we have seen this story play out recently in much of the developed world.

Look at the list of countries that have developed over the years and at best we stock markets would have played a marginal role in development. And even if there is, it does not generate the noise we generate in India.

The real use of equity markets is raising resources and rest all is just fancy play. The focus remains less on raising resources and more on levels.

These are actually times when people should read Noam Chomsky (and likes) to understand how media is trying to influence our views selectively. No one is worried over sheer increase in centralisation of government policy and all kinds of government work. As long as government keeps making noises to help markets tick, rest is ignored. The democratic institutions which India had built so painfully are all getting discarded in such a blatant fashion. There is just no opposition to anything and wherever there is it is getting dismantled.

The best (and the worst) bit is when things go wrong, same set of people will come and tell us, told you so. Piketty should be watching the trends closely in India. He can have another blockbuster ready in 15-20 years. r>g is playing out big time in India and likely to rise..

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