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Wednesday, June 08, 2005

An outlandish prediction - on Sahara

Almost every major bull market in India has ended due to a scam. I wonder why this run should be any different.

Will Sahara pull the market down this time? surely, something is wrong with the Sahara group which has millions in public deposits. Nobody knows anything about the group - how it raised funds, who are the people behind it. They spend money like water and expand in ways that legitimate money can never does.

The group chairman, who loves the media attention, has not been seen i public for 3 months.
( I havent read the cover story in a news magazine about it). He is expected to appear in public on June 10. The company says he is only suffering from mild blood pressure but i guess he needs more than a Hepril.

Now, let me paint a doomsday scenario. Major industrial groups could have exposure to the company. Reliance is clearly a suspect. banks may have funded it. If the public dont get their money back, there will riots in north india cities - atleast lucknow. Politicians may be forced to take some populist decions - like get a bank to bail out these deposits.

Afterall, the group claims 1 in 17 Indians have a deposit in the group - surely a major vote bank - atleast in the northern states.

This will have a cascading effect on the financial system and there is no need to guess where the market will go.

I fervently hope what i write does not happen. we will know shortly.

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