STOCKS & COMMODITIES

0800 21 November 2008 New Delhi Five and a half years to be precise. After Wednesday's trading, US stock indices were at their lowest in 5 years. With yesterday's savage losses of almost 7%, the S&P 500 had retreated to where it was in 1997. This fact intrigues me. In my way of looking at it, stock markets should capture one's faith in the economic future. And even though I am primarily an economy- and stocks-watcher, I believe that the essence of economic progress is technology. If our lives are better today than they were a century ago, it is because of technology - the antibiotics that render most infections trivial rather than life-threatening, the heating and cooling techniques that keep us comfortable, the crop science that has made wide-spread famine history, the jets that allow us to travel the globe, and in the same vein, Facebook, which allows us to keep track of what our friends are doing 24x7. And that's why 1997 is intriguing – Facebook was still almost 10 years away; even cellphones were a rarity. And since some Luddites might say always-on technology only clutters our lives, meanwhile, every day medical science takes a hundred little forward steps, while energy technologists labour in their quest of the Holy Grail of emission-free transport. Clearly, there's something happening in the stock markets that one needs to understand, unless one genuinely believes that one is no better off than one was in 1997. The first data point here is that Indian stock markets even though they have crashed violently, are now roughly where they were in mid-2005. Three years of 'irrational exuberance' in India is much easier to understand than a lost decade in the US. The financial crisis will continue to ripple through our economy, and many companies that constitute our stock index will exit. But, they will be replaced by others on their way up. This replacement, combined with a broader economic recovery, will put the Nifty and the Sensex, our two most popular indexes, back on an upward path sooner rather than later. In comparison, US indexes like the Dow will be challenged by the gradual de-concentration of economic power across the world. For, even though we see many more signs of the west in India, from McDonald's outlets to a fancy for single malt whisky, the fact is that Indian companies control a much larger share of our economy than they did a few decades ago, when the Sensex was peppered with the shares of Indian subsidiaries of MNCs. The US stock market indexes will also be challenged by the fact that – over the last decade, financial companies reaped the benefit of cheap money being spewed out by the Fed. While the whole world of finance benefited, the giants were based in the US. This chapter is now closed. Sitting in India, surrounded by people who need better clothing, better medical care, and more efficient transport, it is impossible to believe that the economy will not throw up ways of satisfying these needs, by companies that can make growing profits from doing so. And so, while ever cognisant of the turmoil ahead in financial markets, my cheque-book is wide open for the companies that will inevitably build a better future for us.