Nov 18, 2010

SKS Microfinance debacle- Some contemplations and comprehensions

What happened with sks microfinance stock debacle and investors losing money is nothing new in stock markets.
The basis of such disasters lies in the craze of investors for their constant striving of ‘new’ and ‘fancy’ (so-called) investment ideas.
Always remember, investors who simply jump to grab every ‘new thing’ on markets, WITHOUT UNDERSTANDING THE ECONOMICS OF THE BUSINESS AND LONG-TERM SUSTAINABILITY OF ITS MODEL are bound to lose money. Long term sustainability is very crucial; even for short term performance of the stocks. Because you never know when a smart investor start exiting and a smart trader start shorting. Its just a matter of time. And you can never figure out when.
This has happened with dot coms companies. You can take example of praj which made short term wealth for investors but since has eroded more than similar amount of wealth. We have many similar examples.
“In fact I would go forward and say common investors (including HNIs), to leave this area of investment to ‘hi-fi’ speculators/investors like the VC funds, PE funds, FIIs and such other sophisticated hard-core professional investors and traders.”