Don’t panic, Sensex will be back...

• Stock prices are subjective. Company profits are objective. Between the two falls the light of wisdom for those trying to read the meaning of this week’s stock market crash. The message for most people: Don’t panic.
• A lot of the mess in the global stock markets this week was triggered by cautious foreign funds pulling out money in the face of fears of a US recession. This is a bit like a driver braking or using the clutch repeatedly in a traffic jam. You can’t blame either the driver or the car for it.
• With the US Fed cutting its benchmark rate by 0.75 percentage points in an emergency measure on Tuesday, a key aspect of uncertainty may be over for investors across the globe. US stocks are down, tracking losses in key banks that burnt their fingers in bad home loans.
• Indian companies, however, are looking towards solid profit growth. In general, stocks are valued by analysts on the basis of their anticipated growth and sales and buttressed by prospects for the industrial sector or economy in question. On all these counts — collectively termed as fundamentals — India’s economy is going strong, and the GDP is expected to grow by 8.5 per cent in 2008/09.
• Whether it is a Narayana Murthy at Infosys, a Sunil Mittal at Bharti or an Ambani at Reliance, business is about generating profits at the ground level. Global inflows and outflows of capital cause their shares to go up in a futuristic view, but smart investors operate on the oft-proven faith that sooner or later a stock's price catches up with the value shown by its profit - and other fundamentals such as revenues, reserves, land or other assets including human resources.