Some of my friend approached me and asked the reason for the market rally of 2000 points immediately after declaring the Indian General Election. Most of them wondering how such huge rally possible and what was the reason behind the same. Yes there is reason behind such huge rally that I was expected after knowing the last result on the previous day.
If you are a true value investor who thinking like Warren Buffet, the greatest value investor, no need to think again to give a proper reply to the above said queries. You can easily answer to this question considering Buffett’s well said Macro Economic Factor effect.
Yes, there has not been any major changes happened in the economy with any supporting micro factors but there was a huge change happened with a macro economic factor. This change is the huge win of UPA and that lead to form a stable government in India for next 5 years. There will not be any uncertainty on this. This is the major influenced Macro factor that lead the market to the new heights.
May be you might have asking a question yourself that, is this guy saying the market will come down again. Very simple. No doubts. It will come back to the same or less point of 12k, from where it start booming, once after UPA forming the government. This is known as the power of Micro economic factors. Uncertainty in economic fundamentals still remaining and that micro factor later drag the market down. There will be a question at this point. What should an investor do at this time? Of course, we should prepare for the next buying opportunity when the market coming down next time and here is a chance to valuate your stocks and to any stock you have invested as a coward, identify the price and move away. As an investor, analyzing the reason of this immediate market height will be useful. This is a temporary boom happened by greed which highly backed by a simple macro factor, the possible stable government, and doesn’t have any supported, solid factor to keep this uptrend intact at this present level. As a value investor, you should take extra care before committing to any investment decisions.Comment if you have any different thought on this post or have a query or doubt on this.