Trying to make sense of SenSex....

Once every few years My colleagues are bitten by the sensex craze... Lunch table conversations discuss nothing but the stock price movements.... The common wisdom is to sell stocks when your colleagues are buying and to buy when they are selling.
But all in all the stock investing pattern in India is more speculation than Investment.

Why do we invest?
The answer is simple to make money.
So Let us say That I have Rs 100 with me today. What are the investment options available to me?

Do Nothing
With India's Inflation rate at 8.33% Next year my 100 Rs will have reduced to 92.3 Rs in purchase power....
Invest in bank FD
With Banks currently offering ~10% rates My 100 Rs would have grown to 101.5 Rs i.e. a growth of 2 Rs in purchasing power.
Invest in GDP (Note not stocks per se. but any activity linked to the GDP Growth)
India's growth rate is currently 8.90 Hence my 100Rs this year will yield 100.53% i.e. .5Rs growth in purchasing power.
Invest in Stocks
Currently most of the stocks on Sensex are @ at PE multiple of around 20/25 assuming the better figure of 20 My Investment of 100Rs this year will result in a Purchasing power of 96.9 next year. So why the frenzy about stock investing.... and the India Growth Story?

To understand the Stock Market Let us look at an entity outside India, The FII. America's current data is Growth 3.2%, Inflation 1.5% FD =4% (??)
So the Investment option above will result in 102.46 for FD, 101.5 for American GDP Growth, 103.4 for Indian Stocks.
Surely Investing in Indian stocks makes better sense for an American Investor.

So Back to making sense of Sensex.

For a pure long term investor Sensex does not make sense. For a person studying the FII Inflow/outflow If the American Growth story is good, Sensex will fall. If it is bad, Sensex will Rise....
And until India's Inflation and Interest rates fall to match the current rate in US. Stocks for Indians would be more speculation than investing