This week saw another huge selling pressure in Indian markets largely driven by FIIs. The unprecedented swing - both ways is not a good sign of a robust economy. Moreover, it dents India's image of being a perfect destination for long term investment horizon. Economist round the world are emphasing the inflation and rising interest rate as major reasons behind this sabotage. But no one is ready to accept the fact in public that it is largely political unstability driven. The scams are not portaying a good governance and puts us far behind reaching the goal of being economic superpower. The ongoing debate in Spectrum Scam is said to be  2800 times bigger than the Bofors scandal. In such a scenario the opposition does not want to let this golden opportunity to make ruling power unstable. Winter session was made to bite the dust and now budget session is facing the heat. The chances of it being abandoned looms large. Demand of JPC by opposition is the cause behind this.

Coming back to markets, eversince the Coal India IPO sucked liquidity, markets have failed to get the much needed momentum. Later, housing scam and spectum scam add woes to this. Food inflation was near to 20% at one point of time and things did not go well with this as well. Confusion over P-Notes was a big worry among FIIs that lead to panic sell off. But I feel, the scams are playing major role for this downfall than any other reasons. Last year as well, we saw markets tanking in January and its preceeding moths but it was largely due to global cues. Dubai world problem made all major global indicies fall. Problems in Greece and Portugal was addition to the same problem. Economist world ever cautioned about rising debts and its implications. European crisis was seen as a lesson for emerging markets such as BRIC countries.

But this time there is no global factor affecting markets. Still we are not able to catch up. Domestic problems are causing the markets tanking now. This reminds me of a similar problem of the year 2007. While almost 95% of global indices were in red since the third quarter of FY 2007-08, Indian markets were doing farely well. And when it started to fall from the last quarter of FY 2007-08, it become a history. This time situaation is similar with India and the rest of the world turning the table. Can we see marktes touching 24000 level by the end of the year 2011.

Thank you

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