Tamilnadu Investors’ Association – Investors Digest
by Vivek Karwa, CPFA, CFPCM ,Investment Strategist & Retirement Planner
110916: RBI has done it yet again, Interest rates have gone up further 25 bps. Though the same was expected by the market and was also factored in the prices is going to hurt the Aam Aadmi in next few weeks to come. The obvious disagreement between the central bank and the finance minister was out in open. In the previous policy though the RBI had hiked rates had mentioned that they have only one tool and policy decisions have to come from the government. Finance Minister also recently had mentioned that more hikes are not favorable. Keeping this in mind the market was also expecting that RBI may announce that the latest hike would be the last.
The recent IIP numbers clearly project bad times for the corporate India. The growth has been dismal this time and a major credit goes to the continuous rate hikes. Inflation is surely a concern but the trend clearly points that increasing rate hikes alone cannot not solve the problem of hyper inflation, hence the efforts of RBI alone may not bring the inflation down but has already started to hurt the common man.
Government is passing through a rough period and there’s total policy impasse in the decision making process. Our country can do so much at present by which we can become a force to be reckoned with in the global politics. Currently countries like the US, Europe, and many others are going through a major turmoil. This is the time when the government should actually get hyper active in pushing reforms ahead so that world starts to focus on India again.
Currently we are seeing continues outflows since the world sees India also as a weak state. The Rupee has hit almost 48 against the dollar which will again impact inflation. The initial result has already been shown by over Rs.3 hike in the petrol prices. What is the fault of common man if the inflation goes up once again due to the fuel price hike? Will the common man again be punished by yet another rate hike in next meet?
The depreciating rupee will widen the fiscal deficit further. Our country is largely dependent on oil imports and hence Rupee at 47-48 is a disaster for the country. If the economists in the country are serious on controlling the deficit they should go ahead and deregulate the diesel prices also. The sad thing is that even a proposal in this regard is still to be made by the policy makers, implementation is still a distant dream
These factors will continue weighing on the markets and we cannot expect great returns in the immediate future. In our previous month article we had mentioned “The next major support for the Sensex comes only in the range 15900 – 15650 which looks most likely to be tested” The market did test the levels mentioned and bounced back. We saw index hit a low of 15887 and value buying emerge. Will the levels get re-tested again? The possibilities are high. We can tend to go down further if no confidence building measures are taken on the governance side.
No investor is ready to invest in the market today. Picking stocks with time horizon of three years and above will definitely yield good returns. The index may be showing levels of 17000 at present but there are good quality stocks available at an index level of sub 10000. One needs to have lot of patience at this point of time and taking professional advice is the best solution today apart from investing in mutual funds.
Look at the track record of the promoters while buying a share. We almost daily hear cases of bad corporate governance now days. Stay away from such companies. High interest rates are going to hurt companies which have large amounts of debt in the balance sheet, avoid such companies totally. Last but not the least, look at the future guidance the management is giving.
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.
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