The best examples of sentiment can be found in the stock market. Why do companies with perfectly healthy balance sheets and order positions suddenly take a beating at the stock markets? Just because one company has done badly, why should a whole industry be penalized without any reference to their fundamentals?
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| Krishna Kumar |
“Where has all the money gone? Where has all the money gone and why?” I was at the DARE CEO seminar in Thane and this was a question from one of the participants.
If India is not facing a recession, and if Indian businesses were doing well till last quarter, where indeed has all the money gone?
As far as exporters are concerned, the answer is obvious. Their buyers have disappeared and all their money is tied up in unsold stocks. The case of real estate is also similar. There are no takers for fresh offerings and the money is tied up in unfinished projects and in land. Clearly, a lot of money across industries is tied up in unsold inventory. But surely, unsold inventory cannot be the answer for all the misery (and I am choosing this word with care) that we see around us.
Welcome to the wonderful new art of managing by sentiment.
The best examples of sentiment can be found in the stock market. Why do companies with perfectly healthy balance sheets and order positions suddenly take a beating at the stock markets? Just because one company has done badly, why should a whole industry be penalized without any reference to their fundamentals?
They call it sentiment. In an older world order, we used to call it the herd mentality. Today, we use the word sentiment to cloak our inability to make considered, independent decision and instead opting to follow the herd – to follow decisions made by an unseen committee if you will. The problem with such decisions are that they are, well – sentimental..And sentimental decisions have a way of swinging between extremes without rhyme or reason.
The currently prevailing sentiment is one of fear. Fear that the future is going to be worse than the present. Those who have the money are holding on to it in fear. They are not spending it or adding value to it or to use a quaint old term, they are not “rotating” the money. They are simply holding on to it.
That is where all the money has gone. And it will take another swing of the sentiment pendulum to bring the money out.
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