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Investors encounter various situations while making investments and some of these can present a completely different experience for them. High amount of liquidity (more funds chasing stocks in the market) is one such area where investors need to be alert and active as it can impact the way in which their equity investments perform. Presence of high liquidity is a situation that has been witnessed in the Indian markets over the last few years. An individual investor can tackle the situation by understanding the points given below.

Sources: The first point to consider is the source from which the entire liquidity has come. This can happen in various ways as the money can come from local mutual funds or it can be from foreign institutional investors (FIIs) or it could even be from insurance companies and pension funds. By looking at the source of the liquidity one can also get an idea as to how this factor will play out in the future considering the ‘nature of the flow.

For example, If the liquidity has been created’ by local mutual funds, then looking at the cash component that these schemes hold in their portfolio, one can get an idea to the extent to which they can continue to influence the flow.

Sustainability: The most important thing as far as the flow of funds is concerned is whether this can be sustained over a period of time, going forward. If this is just a one-off case or a small time event, then the impact of the flow will also be restricted to this time period. But if this can be sustained, then liquidity as a factor in evaluation of the investment becomes a very important point for the investor to consider. The nature of the flow will also play a role in knowing whether this is sustainable or not and if this is not sustainable, then the downside should also be factored in by the investor.

Distortions: Liquidity has the ability to completely distort the picture as far as the investment of an individual is concerned. This can result in a. situation where the share price suddenly shoots up resulting in a position where expectations get distorted.

Investors suddenly begin to expect this kind of sharp rises and a high return from their investments, which may not always happen. This can also lead to a lot of disappointment for many.

Sharp fall: The reason for a rise in the share price of a company has to be considered carefully because if this is just on account of liquidity factors without adequate backup of performance, then the reverse can also happen as suddenly as the rise. This means that if the liquidity suddenly dries up, then the investor can find that the price will plunge back to where it came from or even lower due to fear overtaking them, and this is precisely what happens in lots of small counters. A liquidity flow backed by adequate fundamentals is a better situation for the investor even if the price falls.

India’s Industrial growth slowed to 7.6 percent in December from 13.4 per cent in the same month a year earlier, dragged down by slower growth in capital goods. The latest data from the Commerce and Industry reinforced fears that high interest rates and a rising rupee have begun to impact the broader economy.

India’s gross domestic product, the government said last week, is expected to grow 8.7 percent through this fiscal year ending in March, down from 9.6 percent last year. “We expect a continued soft landing trend for the rest of the financial year and into 2008/09,” said Indranil Pan, chief economist at Kotak Mahindra Bank.

While demand for consumer goods and their production were the first to be hit by the high cost of finance, now it seems to be taking a toll on capital goods as well.

Growth in production of capital goods slowed to 16.6 percent Commerce and Industry Minister Kamal Nath said the government planned to have meeting with industry groupings to probe into the reasons behind the slowdown. “Is it a temporary aberration or is it being caused by some other factor. I don’t know … high interest rates could be one factor,” he said.

A consulting and information technology enabled Services Company, based at Hyderabad, India; SATYAM was founded in 1987 by B.Ramalinga Raju. Derived from Sanskrit word which means truth, the name of the company is based on the name of Satyanarayan Raju, father of B.Ramalinga Raju.

Satyam’s network spans 57 countries, across 6 continents. Nearly 42,500 dedicated and highly skilled IT professionals work in development centers in India, the USA, the UK, the UAE, Canada, Hungary, Singapore, Malaysia, China, Japan and Australia and serve over 570 global companies, including over 165 Fortune 500 corporations

Satyam Computer Services Ltd is offering a wide array of solutions customized for a range of key verticals and horizontals. From strategy consulting right through to implementing IT solutions for customers, Satyam straddles the entire IT space. It has excellent domain competencies in verticals such as Automotive, Banking & Financial Service, Insurance & Healthcare, Manufacturing, and Telecom-Infrastructure-Media-Entertainment-Semiconductors (TIMES). As a diverse end-to-end IT solutions provider, Satyam offers a range of expertise aimed at helping customers re-engineer and re-invent their businesses to compete successfully in an ever-changing marketplace.

Satyam’s subsidiary Satyam Infoway provides Internet Access & Hosting services and Network & Network-enabled services. Satyam’s BPO subsidiary Nipuna provides a host of Business Process Outsourcing services. Satyam’s range of consulting and IT skills has helped businesses re-engineer and re-invent their products, services and processes to compete successfully in an ever-changing marketplace.

Satyam’s state-of-the-art software development centers in India, the USA, the UK, the UAE, Canada, Hungary, Singapore, Malaysia, China, Japan and Australia work with a variety of business and technology partners to design and implement projects onsite, offshore and offsite.

Satyam’s highly skilled, dedicated IT professionals, its subsidiaries and Joint Ventures provide customized IT solutions for several industries using our range of technical expertise and experience.

Satyam’s Values

These values have led to the creation of a unique organizational structure, with every functional unit designated as an independent business enterprise, each responsible for its own resource management and its profits and losses.

The organization emphasizes on acquiring an in-depth knowledge of the customer’s context and needs, and designs solutions fine-tuned to these needs. Satyam’s ideas and products have resulted in technology-intensive transformations that have met the most stringent international quality standards.

Simultaneously, Satyam teams proactively work on turning new ideas into products that answer global market needs. One such product is Vision Compass, a web-enabled collaborative enterprise management software.