Few Words on Market…

Tamilnadu Investors’ Association – Investors Digest

by Vivek Karwa, CFPCM ,Investment Strategist & Retirement Planner

110617: Indian market is not just an underperformer among the Emerging Markets but has performed the lowest among the global markets. When we talk about global markets we have to take note of US and other European markets where the problems still persists, as it was earlier. We keep getting news flow on how these economies are recovering and then few days later the news fizzles out as some data comes under estimated figures and the markets are just pushed to square one.

The global situation is not willing to improve. The African problems remain where they were and now Greece has erupted into a state of revolt. The debt crisis is not subsidizing either. Market is expecting QE3 and if seriously announced may propel the indices in the short term. Governments worldwide are trying to propel the spending so as to improve the industrial production. The old proverb goes… “once bitten, twice shy” and that’s the exact state of the market right now.

A recent survey in the US reveals that majority of the investors at present do not want to indulge in any kind of risk and prefer, investing their money and savings, in bonds and fixed income securities. This shows that investors even in the matured markets have become risk averse. Similar is the case with Europe and hence even if QE3 is announced, it may not help the industrial growth since people would prefer investing the monies in safer assets than going an spending the same.

Dollar is expected to remain weak and hence money will keep flowing into metals like Gold and Silver. Most of the investor in India were running behind silver and are now stuck with the holding bought at 70000 and above. Silver looks very speculative and is not advisable to try and time the market. Someone willing to buy and wait for next few years can start looking once it drops to 38000-40000, review at that point of time and then decide.

Gold also has become speculative but will find genuine physical demand on every drop and that can limit the fall, also since the dollar is totally in doldrums most of the central banks in the world will continue holding large quantities of gold in order to safe guard their currency reserves. Gold is still expected to deliver atleast the inflation returns and hence if someone really wants to indulge in metals gold remains to be safer than silver. This doesn’t mean a outright buy recommendation!

We last month had given the support levels on Sensex at 17500 and on Nifty at 5250. Market did try to come almost to those numbers but again bounced back. The support for Sensex still lies in the area 17500 – 17280 which become very critical for the medium term and if the same is broken decisively and trade below if for few days then the next tentative support would come in the area 15950 – 15650 which is quite a bit of correction. Mentioning the exact level would be possible only once the first level is taken off.

We are trading at reasonable valuations keeping in mind the expected 2012 earnings. Hence expect some amount of buying emerging from the long only institutions. Please do not touch any company which carries even small iota of doubt in the corporate governance front. You can buy them if and only they are proven innocent. News of investigations can bring down the prices drastically but that does not mean an investor should buy the same. There could be recoveries as sharp as the fall but we need to first focus on the risk and then look at the possible returns.

Disclosure:- It is safe to assume that the author may have interest in the sectors recommended in this news letter. Seeking personal advice from your Financial Advisor is recommended before acting on any of the substance given herein. The numbers, figures, etc., presented may have been taken from various sources.

*Vivek Karwa is a Management Committee Member of TIA but the views mentioned are of his own and not necessarily that of TIA.

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BSE, Bombay Stock Exchange, NSE, National Stock Exchange, BCFM Training Chennai, NCFM Training Chennai, CFP Training Chennai, Certified Financial Planner course Chennai, NISM Training, www.tiaindia.com, www.tnfpa.com

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