MFF – 100509 – 14:27 Hrs

– PIGS now has become PIIGS! with Italy also joining the fray of countries which may face severe default crisis. Indian market has already seen the effect with correction of 10% – 20% in various stocks. The market is totally driven out of the news flow from EU nations, which is totally not understandable to small individual investors! Infact one investor called and asked if the problem is related and connected to Swine Flu! He had this doubt since he has been reading that global markets are down due to PIGS!

– For those who do not understand the problem, here is a snapshot: PIIGS Countries stand for Portugal – Ireland – Italy – Greece – Spain. Governments of these countries like India have been spending without any control and thus their deficits have been continuously on the rise. These PIIGS countries now have deficit to there GDP of anywhere between 15% to 20% thus these governments have now run out of money even to pay back the interests on the debt. Like Iceland the world fears that these PIIGS countries also may now go bankrupt. EU nations have already approved a major loan package for Greece but the market fears that this amount may not be enough and more countries many fail now.

– Indian deficit is also large but since we are a fast developing nation such fears do not bother us. But it’s high time the deficit is curtailed and the government stops spending unchecked. Some fear that we may see repeat of 2008. The situation is not that grave right now since we are not going to see banks failing and distress selling, but damage will be done due to crash of confidence levels as these countries may take many many years to recover back.

– Growth lies in India and hence money will once again flow here. Global investors are being cautious and hence have booked profits. They are even more cautious on China. India is today the favourite destination if someone really wants to invest in Emerging/Brics nations.

– The SC ruling in favour of RIL will also give some support to the Index. RIL has not performed last six months due to this overhang and now this positive development can bring in some gains to the stock. This ruling for Individuals means we would keep paying higher for the Gas we use. The power generated out of this gas would also be costlier. We have had already mentioned in one of our articles on our website that if 17100 on Sensex is taken away then the next support would come at 16300 – 16200. At this support level investors may enter into specific stocks which can give handsome returns on the next upmove. We would shortly be opening MFF for fresh subscriptions.


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