"Inflation is when you pay Rs. 100 for the fifty rupee haircut you used to get for 25 rupees when you had hair"; a quote I received on twitter. In India, when we speak of inflation, we've never really talked about haircuts. No, I'm serious, stick with me.

The Inflation Index that our country talks about is based on the Wholesale Price Index (WPI), which is a weighted sum of product prices at the wholesale level. That means stuff that you can buy at wholesale markets, such as vegetables, copper, fuel, or even liquor. But it doesn't include the cost of services; the WPI will indicate the cost of vegetables and meat to your favourite restaurant, but it won't add up the cost of chef/waiters' salaries, rent of the premises, air-conditioning costs and valet parking. In the haircut example, they'll note that the scissors or shampoo got more expensive, not that the haircut costs you more.

The world over, what is used is a Consumer Price Index (CPI), which uses a basket of goods that you are

Many of us desire to make money from the stock markets, because it doesn't seem to take a lot of skill. After all, like a casino, all you need is one good trade. That's what we read about — the success stories of investing talk about how Warren Buffett bought into Coke, or Rakesh Jhunjhunwala bought Titan, or Paulson shorted sub-prime mortgages or such.

While these investors — and many others — have benefited from the huge success of a few stocks, there are thousands, even millions, of other investors who lost much of their money chasing performance. And not just speculating, but even with deep, well researched analysis. A stock that seemed like a steal three years ago is still a steal; they have higher profits, and a lower stock price. In another ten years, they might still have the same stock price. The "value trap" attracts people who think luck plays no role in investing, that all it takes is good analysis.  Value traps are lessons you don't learn about in books; real life teaches

In a recent trader meet, a speaker asked on stage where the market closed last. Answers were "4714" and other figures around the 4700 number, but the speaker was looking for another answer. It dawned on us soon that he was looking for the Sensex, which none of us knew even to the closest one thousand. It was around 15,700, said the speaker, dismayed at the total lack of awareness because his slide said "Sensex: The Index The World Tracks".

To a certain extent, that remains true. People do talk about the Sensex. "I'll be a buyer below 16,000", you hear. Newspapers and TV channels cheer the appearance of "20,000", a number only associated with the Sensex.

But the irrelevance is mostly to the trading community. Volumes have deserted the Bombay Stock Exchange, for the "better" deal at the National Stock Exchange (NSE). Looking at the "cash" turnover, the gap between the two exchanges has widened from 2000 onwards.

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What has changed since 2000? For one, the derivatives market has