The Fall of Lehman Brothers : Opportunities in Bloodbath

Hi!

The post may seem unusual but the fact of the matter is the the fall of 164 old year old Lehman Brothers, a dominant investment banker of the USA brings turmoil to financial markets worldwide. Stocks and indicies have moved southward and may continue to do so for some more time, till the dust settles completely. No doubt that the financial markets are in troubled times. The wide fluctuations and exit of large players or fence sitting is a testimony in itself.

But, there's silver lining too. And they are not only one. In fact many.

Looking at the international outlook the foreign rating agencies may be skeptical of India's rating. Liquidity in our markets may continue to be strained for some more time as the FII may like to pull out money to buy assets in their home countries. After all, they understand their own country, their companies and the associated risks better than they would ever like to know our's. When asset prices in their own (foreign / western) countries are at record lows any surplus money they have may be used to buy them at bargain prices. Even government's there would like them to pitch in financial resources to prevent further bad shaping-up of the entire economy. A damage control kind of thing may be attempted - to the extent possible.

In Indian markets, this can result in a further fall in security prices in days to come. For liquidity getting sucked out by FIIs may also be met by a poorer support from domestic buyers. Markets have been witnessing such turbulence before. In the recent past, say even post liberalization, the Harshad Mehta scam, the Ketan Parekh imbroglio, the technology bust and Pokharan blast had been events which brought markets down - and even down to historic lows. Such are the times which bring the best opportunity to buy quality stocks and bargain prices.

There are companies in our markets which are fundamentally very strong and have a long term business model in place. One should scout for such opportunities and enrich their portfolios. Though times never last, but though people do. And people who make tough financial decisions are sure to reap the best of the investing in security markets.

This mayhem has brought a good number of our stocks at unreasonably and unjustifiable low prices. The situation may not continue to be the same for long. The moment stability returns, our markets could show a dramatic recovery and then we may only lament remembering that we could have bought at 'those' lower prices.

Another side of the story is that so long as we have growth left in our economy which is higher than the growth available in western countries there is no reason the foreign funds to withdraw on a permanent basis. After all, what will they do with so much cash? Invest back in markets, is the only logical answer, for it is also their principal business.

So, find out that dream stock you always wanted to buy when the SENSEX was at 21000 points. Why not make the most of this opportunity from the bloodbath on the street and get rich.

Sachin Agarwal