Saturday, January 26, 2008

Rumble Tumble

26th January, 2001 will be remembered by many with grief, terror and sadness. Because it was on that day at 8:46 AM that a massive earthquake measuring 6.9 on Richter scale rocked entire Gujarat. Kutch district was the worst hit with many villages wiped out entirely. Multi-storied buildings in Ahmedabad collapsed as if they were made of cardboard. Morbi (the town I am in right now) was also badly affected. Entire colonies had vanished in few minutes. So it is every 26th January that people are afraid of a repeat of this ghostly scenario. We know that earthquakes are not calendar bound but human mind can be irrational especially if it has been through such terrible events. This January people of India and especially Morbi have experienced earthquakes of different kind.
Financial earthquake that hit India last week might have caused much more grief and terror across the country than the one caused by tectonic movement. With the stock market going nowhere but south, billions of rupees were wiped out. Those who had entered late expecting a bullish market and had purchased stocks at very high prices were inconsolable. Many lost their savings that they had kept for their retired life. There were SIX cases of heart attacks in one town. Major (and most lucrative) stocks fell by 50-70%. Although markets are stabilizing now, damage has been done. Traders and investors who wanted to make a quick buck overnight from the bull run were cut to size. Investors who have invested in fundamentally strong companies don’t have anything to fear. I don’t invest in stock market but I do follow it. I had predicted FII panic a while back due to slow down in USA and bad credit market. Another reason was that lot of money has been invested in two major IPOs – Future Group and Reliance Power. So people didn’t have much cash on hand. But those who had have made handsome profit. In fact on 22nd January when market was down I advised my father to buy some stocks for both of us. It turned out to be a sound decision. My first step in to stock market has generated good returns. Looks like the market are recovering very well now after assurance from PM and FM and cutting of Fed interest rates.
Now let’s talk about the second earthquake that rocked Morbi. On 19th January, 2008 officers from Directorate of Central Excise (Intelligence) raided couple of factories in Morbi for not paying excise. They collected documents which supported their doubts. Companies had not paid excise for turnover of Rs. 60 crores. This was only the beginning as the news of excise raids spread; dealers and distributors started shutting their offices/shops to avoid raids. But officers from Central Excise (CE) were in no mood to leave them lightly. More and more raids were conducted. Some people shut their factories and offices. Financial losses started mounting. It was a mix of anger and fear. This volcano erupted after 5 days of first raid. CE officers had been to one factory to check their documents. Huge crowd had gathered around factory premises out of curiosity. They had abused some traders earlier. Unfortunately these traders were a part of the crowd that had gathered outside. While questioning, officers physically abused a clerk and a factory worker. This was the straw that broke camel’s back. The crowd rushed in and whacked those officers. They didn't stop there. They went ahead and pelted their car and burnt some laptops and documents inside the car. While this was going on, another CE car came on the scene. Officers inside that car immediately gauged the situation, but they had nowhere to run. So they just sat inside the car locked the doors. Crowd had gone out of control now. They broke windows and pulled them out thrashing them badly. All of them badly mauled. It was only after police came on the scene that they could be rescued. Next day there was a meeting of ceramic association and they decided to shut factories for 1 month in protest and to create demand for their wares. Impact was clear this morning. When I drove from home to work, there were no trucks, tractors or cars on the roads that are usually blocked by them. As per my calculation financial transactions worth 100 crores are made in Morbi EVERYDAY. One month of shut down translates into a loss of 3000 crores. What remains to be seen is whether government decreases the excise duties or whether manufacturers in Morbi decide to pay full excise and hence increase the price of their products.

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