People are so reluctant to utter the "R" word, I wonder how economists and financial analysts world over would react to the "D" word.
Read about the great depression of 1929 here:
http://en.wikipedia.org/wiki/Great_Depression
Deja Vu?
Advice for the day: Stay atleat 50%-75% in Cash. No withdrawals/redemptions/SELL yet, but no fresh BUY signals for this week either
Thursday, October 09, 2008
Tuesday, October 07, 2008
STOP Accumulating till Nifty falls below 3450
Intended to blog only weekly, but the current situation in US has necessitated that I intervene to modify on my previous blog.
US markets are down dramatically this (US) morning, consumer confidence is at an all time low. Rate cuts by Australia and India and nationalization of banks (or banks' losses) by Spain, UK, Finland are failing to restore confidence in the financial system.
This is -ve for asset based valuations like Real Estate, -ve for Banking sector obviously, -ve for service companies (IT contractors), -ve for highly cash flow -ve Retail in India, -ve for FMCG and consumption based industries and hugely -ve for all project companies depending on project finance.
In my 6 years of investment and 9 years of tracking Financial markets, I have never come across such a situation. While I would not recommend a sell-off of assets, I would definitely recommend a major slowdown in accumulation of stocks till the dust settles.
The financial economy is beginning to affect the real economy and I would be stupid not to admit the fact that I do not know where and how this is going to stop. Most acts by central banks are still standalone and not concerted world-wide.
Conclusion: WAIT, Accumulate further only after Nifty breaches 3450 or till the dust (and global capital markets worldwide) settle down.
US markets are down dramatically this (US) morning, consumer confidence is at an all time low. Rate cuts by Australia and India and nationalization of banks (or banks' losses) by Spain, UK, Finland are failing to restore confidence in the financial system.
This is -ve for asset based valuations like Real Estate, -ve for Banking sector obviously, -ve for service companies (IT contractors), -ve for highly cash flow -ve Retail in India, -ve for FMCG and consumption based industries and hugely -ve for all project companies depending on project finance.
In my 6 years of investment and 9 years of tracking Financial markets, I have never come across such a situation. While I would not recommend a sell-off of assets, I would definitely recommend a major slowdown in accumulation of stocks till the dust settles.
The financial economy is beginning to affect the real economy and I would be stupid not to admit the fact that I do not know where and how this is going to stop. Most acts by central banks are still standalone and not concerted world-wide.
Conclusion: WAIT, Accumulate further only after Nifty breaches 3450 or till the dust (and global capital markets worldwide) settle down.
Monday, October 06, 2008
RBI Cuts CRR Rate
Well, to be honest, got this news midway while I was typing the previous blog so it would be unfair not to acknowledge that...
RBI has cut CRR by 50 basis points for better liquidity management.
Source: http://rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=19211
RBI has cut CRR by 50 basis points for better liquidity management.
Source: http://rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=19211
Market Looks Attractive, Start Accumulating in small quantities
I think this is the right time to start accumulating select largecap stocks in the market (Mid-caps can be picked up, if they are appearing at a deep discount to their asset valuations).
My view on the Indian market is that the markets might(Might) fall to 3400 - 3450, but not expecting them to fall below that, too much of value in the market at that point to ignore.
Expecting global syndicated action by Central Banks if markets have a big fall. Interest rate cuts round the globe, this will have 2 effects:
a) Interest rate sensitive sectors should gain
b) Commodity prices world over should rise, however the demand destruction already caused due to uncertainties and volatility in the market coupled with the fear of increaesed government regulation should restrict any excess bubble in commodities for now. So, avoid the commodities sector atleast for now, watch out how the prices pan out.
My sectors in this market: Large cap capital goods (L&T, BHEL), Large cap Banks(ICICI Bank, SBI), Largecap IT companies(TCS).
Avoid Metals, Cement, Real Estate.
Unlike many people I am bullish on Power Sector (esp. Power Finance) and Construction companies (which do not own real estate but are builders/contractors)
Some Qtns to be answered?
1. Why is Infosys not in the largecap IT companies list?
A. I have employment relationship with Infosys, so to avoid the mess of insider regulations etc, Infy will be absent from my future analysis unless it is a comparative of the Largecap IT companies. Infosys will be absent in company specific BUY/SELL recommendations.
2. HDFC is absent in large cap : Too much exposure to RE sector, am not comfortable with that.
3. Why +ve on Cap. Goods: Financial muscle is strong, so can tide over. Not over-leveraged, hit by high interest rates, which might have peaked. Most of their contracts have escalation clauses now for future projects, so relatively insulated to commodity bubles.
[Can be hit by short term forex,commodity hedging prices though]
My ideal calculation is: if you have 100 Rs. in cash now. Invest 25% in Yes Bank FD (10.75% for 1 year), 10% in gold (for safety against inflation), 10% in equities (keep 10% cash to take care of future opportunities) and remaining in cash.
And as usual, postpone all non-discretionary expenses :)
My view on the Indian market is that the markets might(Might) fall to 3400 - 3450, but not expecting them to fall below that, too much of value in the market at that point to ignore.
Expecting global syndicated action by Central Banks if markets have a big fall. Interest rate cuts round the globe, this will have 2 effects:
a) Interest rate sensitive sectors should gain
b) Commodity prices world over should rise, however the demand destruction already caused due to uncertainties and volatility in the market coupled with the fear of increaesed government regulation should restrict any excess bubble in commodities for now. So, avoid the commodities sector atleast for now, watch out how the prices pan out.
My sectors in this market: Large cap capital goods (L&T, BHEL), Large cap Banks(ICICI Bank, SBI), Largecap IT companies(TCS).
Avoid Metals, Cement, Real Estate.
Unlike many people I am bullish on Power Sector (esp. Power Finance) and Construction companies (which do not own real estate but are builders/contractors)
Some Qtns to be answered?
1. Why is Infosys not in the largecap IT companies list?
A. I have employment relationship with Infosys, so to avoid the mess of insider regulations etc, Infy will be absent from my future analysis unless it is a comparative of the Largecap IT companies. Infosys will be absent in company specific BUY/SELL recommendations.
2. HDFC is absent in large cap : Too much exposure to RE sector, am not comfortable with that.
3. Why +ve on Cap. Goods: Financial muscle is strong, so can tide over. Not over-leveraged, hit by high interest rates, which might have peaked. Most of their contracts have escalation clauses now for future projects, so relatively insulated to commodity bubles.
[Can be hit by short term forex,commodity hedging prices though]
My ideal calculation is: if you have 100 Rs. in cash now. Invest 25% in Yes Bank FD (10.75% for 1 year), 10% in gold (for safety against inflation), 10% in equities (keep 10% cash to take care of future opportunities) and remaining in cash.
And as usual, postpone all non-discretionary expenses :)
Saturday, October 04, 2008
Resolution to be more consistent
Will try and be more consistent with my posting as well as with my learnings. Will try to post once every week and follow-up with comments/learnings of the previous weeks recommendations/thoughts
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