Monday, 30 June, 2008

ET Editorial or CPI (M) Press Release???

ET Editorial or CPI (M) Press Release???

Please read this view on the edit page of Economic Times, Chennai (dated June 30, 2008):

I've been a regular reader of Economic Times for well over a decade. Have agreed (or occasionally disagreed) with their views but have always respected their thought processes.

The above article left me speechless. If it was intended as a satirical piece, I didn't quite get it. May be I'm getting too old. Alternatively, if this article had been a press release by the CPI (M) folks, originally written by people like M/s Karat, Raja, etc., I could possibly begin to understand it.

But coming from ET, of all the places! What can I say???

This article actually suggests that Mutual Funds should deploy their cash holdings (which, incidentally, belongs to investors like you and me - not to the general public of India) into shares. The reason: "To change the sentiment in the market".

Since when did "Changing the sentiment in the market" become the objective of the fund managers? I was under the mistaken impression that fund managers were supposed to maximise returns on my hard-earned money invested with them in accordance with the original mandate of the specific fund / scheme. If the fund manager feels that this is the right time to go out and deploy cash to meet the scheme objectives, by all means let him/her do so.

However, if the fund manager thinks that markets are likely to tank further, thanks to factors like:

  • Panicky FIIs, who are getting out of emerging markets to handle their own self-created mess back home
  • Zooming commodity prices, especially that of the rude crude!
  • Imported inflation
  • Political uncertainties
  • Likely earnings downgrades

then, ... ... ... ...

The fund manager ought to wait a few more days / weeks so as to buy exactly the very same shares that he/she thinks is worth buying at an even lower price.

Economic Times, I certainly expected more from you - I didn't expect you to get swayed by such things like "market sentiment" to give such imprudent recommendations to fund managers of AMCs.



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