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Top 5 Indian Stock Market Pitfalls as Nifty falls below 200 EMA(PIN,INP,EPI,INDY)

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Indian Stocks Market are a very difficult place to invest despite claims to the contrary which will be made by institutional investors.The all pervasive corruption present amongst most of the company managements makes bottom up stock picking a tough call.Even institutional “smart” investors like Goldman,GMO frequently get tripped by fly by night operators.Market operators blatantly manipulate stocks while the primary market is a “pump and dump” heaven.However the Indian growth story has fooled fund managers from outside to keep investing into the story.I have written in the blog numerous pitfalls present in investing in India.Some of these are coming home to roost as the Indian stock markets have fallen by more than 10% in 2011 despite other markets making new highs.Here are the top 5 Headwinds facing the Indian markets in 2011.

1) Corruption– Scandals and Scams seem to be hitting India daily with stocks taking massive hits.The Third  Largest Indian Conglomerate Owner recently paid the highest fine in history to settle insider trading charges.Note that group has seen the biggest losses in the last 2 years with stocks losing 80-90% of their value.

2) Inflation – The Indian Central Bank has been guilty of being behind the curve in raising interest rates like some of the other counterparts in Asia.As a result,inflation has been flaring into double digits.Food inflation is touching nearly 18% in a country where 80% of the citizens make less than $2/day

3) Income Inequality – Keeps on increasing as the businessmen-politician-bureacrat nexus drains India dry.$2 Billion home coexists with most of the world’s hungry

4) Social Unrest (Naxalism) – India’s PM recently said that Naxalism was India’s biggest problem .This home grown terrorism is due to massive poverty and disillusionment in the tribal and rural areas of the country.

5) Oil Price – As Oil Prices touch $100/barrel,India’s problems seem to multiply.India imports 80-90% of its massive and increasing oil requirements. India gives subsidy on oil products leading to monetary and fiscal headache for the government.If it raise the domestic prices,it leads to political and inflation problems.If it does,it leads to massive losses for PSU Oil companies and increasing fiscal deficit.

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Abhishek Shah

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