Markets on Boil, Trade Upside, Invest on Sharp Correction

World market seems to be on an upsurage after the recent Eurozone announcements. However, all the announcements have done is pushed the can a few weeks to a few months down the road.

SYSTEMIC ISSUES ARE UNRESOLVED:
Systemic issues of high debt/GDP and reducing private consumption and public sector spend will contract economies widening Debt/GDP ratios. Both personal and sovereign balance sheets need to unlever. No long erm resolution is adopted:

• Resolution 1: Euro as a currency is de-valued to promote export promoted growth
• Resolution 2: Weaker sovereigns are banished out of the Eurozone in a systemic way and stronger governments recapitalized the banks with help from China/Mid-East, Other hungry investors
• Resolution 3: No nominal devaluation, but increased inflation supported by current low-interest rates regime to devalue in real terms
• Resolution 4: Sharp correction in prices of basic raw materials [Hydrocarbons, Metals, Crops] in dollar terms [Unlikely unless BRICS enter recession]

Since none of the resolutions are adopted in completeness, a solution seems elusive. However, by partially defaulting and partially recapitalizing the banks - the can has been pushed further down the road.

TRADING CALL: Trade on momentum of euphoria, go long but exit on profiting. Keep strict trailing stop-losses.

INVESTMENT CALL(Indian Market):

• PSU Banks starting to look lucrative (Check exposure to Real-Estate, Power Sector before investing.Any bank low on both these sectors is a good investment candidate even at current prices).
• Avoid commodities and real-estate.
• Infrastructure (Roads) seems good to buy when the current euphoria ends and corrections begins (down 15% from current levels).
• I am still undecided on Infrastructure (Power), with DISCOMS struggling and delays in generation sector. Will need to research a bit more.