110809 – Started working at 10 p.m. of 8th August and it’s now little over 4 a.m. of 9th August but have made up mind to write atleast few lines before going to sleep and may be by that time it would be a good morning for most of you J
– Most of you would have gone to sleep seeing Dow trade quite stably without much panic after the recent downgrade, but you all will wake up to a shock of 635 points shave off on the Dow which makes it 5.55% and the Nasdaq has seen a 7% cut overnight. The European markets also have cracked by 3% to 5% across the board and the Brazilian Bovespa has closed down by little over 8% which is part of the BRIC’s countries. The commodities also have been cracking off late due to growth concerns and the only solace world can take at this moment is from the crude prices which is now trading at $81 approx. Gold continues to glitter and one needs to be cautious also at this point of time as any corrections in the yellow metal may be sharp but will at same point of time attract more buyers.
– US 2 year Treasury is trading at a yield of just 0.26% and the 10 yr UST at 2.32 after the rally in the treasury prices over night since the rate cut by S&P has sent jitters to the market of a prolonged slowdown. S&P has meanwhile put UK and France’s AAA rating on watch for possible cuts. So by all these one thing is clear, US and EU may not stabilize in the next few years atleast and may take whole of this decade to recover back to normalcy.
On a lighter note… sms’es have been floating around stating “US rating should have been changed to XXX from AAA, signifying the present state of the investors globally”
– So should one be excessively worrying now? Does a AA+ rating of the US means it is going to default on all the payments immediately? AAA rating meant Highly Safe and AA+ rating means Very Safe! Can anyone actually explain the difference? Yes the growth is not visible and we also know that the growth in the developed nations may become a “rare thing” for next many years. It’s a global shift which is happening! US and many other countries need to lose their super power status soon so that our country Bharat can take the job! Mentioned ‘Bharat’ here since if we are the super power they should learn our countries traditional name and should tow our line! Hope we get a leader with back bone who can do this job for us. Namo is the obvious choice!
– Dow has closed at 10810 and is very close to its 200 DMA of 10740, S&P 500 is already below its 200 DMA. In short term due to the panic our markets will surely try to test lower levels. On Monday market did try to recover in the afternoon but the selling by FIIs dragged it back. The immediate support and the target for Sensex falls in the range of 15800 – 16000 points and for Nifty the same range comes around 4680 – 4750. We are trading at a valuation of just 12.99 Fwd PE as on Monday which is likely to get cheaper on Tuesday.
– Remember few weeks back India was seeing a reverse flow of FII and the same was moving into US markets in anticipation of recovery there. Now the FIIs have no other option but to return back to India as their obvious choice. China could be another time bomb for investors. India is going to pitch for a rating upgrade and Goldman Sachs has already upgraded India to overweight from underweight. The biggest problem of our country is the corruption in the power corridors and behind the scenes power.
– Small reforms can push the Sensex up even in this turmoil as while the US limps over this decade India can leap. Finance Minister is trying to cut the deficit by taking away benefits from the people which are not making headlines! This is a smart move by him but the public will suffer since things are only going to cost more for the Aam Aadmi. One benefit every Aam Aadmi should demand is the immediate reduction in the fuel prices since crude has cooled off to $81 and that can help reduce inflation so that RBI’s hyperactive rate hikes can take a break.
– So this is the time to buy. Investors in the market past 5 years should have clearly learnt this by now. India is likely to grow atleast by 6% till 2020 and though 6% may look small number to our local investors it’s a phenomenal growth rate, for the west looking towards us. One has to be careful on what he is choosing. Since though the market may go up after a point of time, not all stocks would move. So be very very selective else consult your advisor. One can seriously look at our “Most Transparent & Most Economical” product EPCS. Click Here to read the details.
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Can I forward to non-members of TIA.
K A Doraiswamy.
Very good article, Sir.
Nice article Vivek-ji. While it is a known fact that India is one of the most attractive market for investment rightnow, the impact of a U.S. economy crash on India is yet to be seen. Thus probably FIIs are playing it safe by putting in Gold which keeps soaring everyday. I think for a short term investment (3 to 6 months) Gold seems to be a great option, correct me if I am wrong. Regarding Namo, even I wish he is projected as the next PM candidate but looks like there’s no such interest within NDA, unfortunately. Finally, I believe Goldman Sachs has upgraded India’s rating from Underweight (not favorable) to Marketweight (neutral) and not Overweight (favorable). Keep up the good work!
Yes u r right its Marketweight! These error is due to not sleeping all night and is regretted.
Excellent and well written article. Very nice indeed. A lot of good thinking and hard work has gone in writting this and those who wish to really admire and appreciate the efforts, should start working on their portfolios. Great work, Vivekji.