Year 2008 was disastrous for all investors in stock markets, commodities( excepting Gold) and the troubles in US economy and financial system have affected safe economies like China and India too. 2009 has confirmed the global recession by now, thus, the government and RBI have initiated several steps to help the demand in the economy, but still the light at the end of the tunnel is still eluding. Technical analysts, are trying to fix the bottom of this bear phase taking into consideration of Dow Theory, Elliot Wave Analysis etc. 7200 is what some look at and 6200 in worst scenario on sensex with another unexpected 'catastrophy'. Just as no one can exactly predict the top of a bull phase, equally bottom prediction too is difficult. Bottom formation is a process and time consuming, tests patience of investors.
These bear phases are excellent trading opportunities for professional traders, with strict discipline. Coming to stock picking...these are the times for long term portfolio building, which institutions like DFIs have already started. The time horizon should be 5 to 10 years. Inflation is below 4% according to Government data, but in reality, essential items like grocery have not become cheap, hurting middle and lower class people in the country. Repo is now 5% and reverse Repo 3.5%, PSU Banks are flushed with funds with reduction in CRR, but preferring to invest in Government Bonds, which are safe rather than lending.
NPAs will be raising in the coming quarter, as the excesses in Realty sector and Personal loans will cause number of defaults raising, which is already discounted in banking stocks. General Elections notification is already out, thus, the government at the centre cannot take any policy decision, till the new Lok Sabha is formed and full fledged budget is presented, which might happen before 31.07.2009. The news from US is disturbing, as Obama tries to revive the crippling economy, decision to stop H-1 Visas completely including renewal and extension of existing ones, force, Indian Tech companies relocate their personnel elsewhere or bring them back to India, hurts major employer sector of Indian Economy, and contributor to GDP all these years.
Ending of the current bear phase, and onset of new bull phase shall be few years away from now. Theoretically new bull phase will be after previous all time highs are cleared. But, once the current bear phase ends, some time during 3rd quarter of this financial year, the long term bear phase will have few bull cycles, which should not be missed by traders and investors. The formation of Lok Sabha by the end of May 2009 will give first indication whether the bear phase found a bottom as far as Indian Markets. We need to wait and see, but accumulating quality stocks,especially PSU banks and PSU stocks on every dip or any fall shall not be a bad idea.
Will update the blog frequently from now on new features like currency futures too hence forth. Happy trading and investing!
4 comments:
Welcome Back Sir,
I was wondering if long term investing (5-10 years) as proposed by Professionals is actually a good idea. As far as I am concerned, this problem is a behemoth and very difficult to solve. So, in that context, wouldn't it be prudent to avoid risk than invest in stocks for a greater risk and very little return?
Vinay
Well Mr.Vinay,
Thanks for your querry!
If you are not a trader then these are the times to accumulate blue chip stocks for long term port folio building by adopting 'Systematic Investment Plan' selecting the stocks yourself or leaving it with some Fund offering ELSS schemes, where you can shuffle your portfolio mix also 24 times in a period of 60 months.
Look what happens with inflation at 3.03% interest rates on deposits also do come down drastically in the coming months, then equities only can offer more than 10% annualised returns.
One can directly invest in stocks or through a mutual fund, or ELSS..but one should have some percentage of stocks also as asset class, as things will not continue for ever in one phase either 'bull or bear phase'
Hope I made my point across to you. Decide afte assessing the risk perception of yourself, and long term wealth creation in mind.
bkvrkrao
dear sir,
welcome back. iam looking forward for your safe option strategies.
in one of your posts, you had mentioned that before march there will be big fall due P-Note issue. Due to still stands by that?
there was a huge open interest in 2200 march puts.what do u think about that?
saba
Dear Saba,
Already most of the PN investments are withdrawn from our markets, which is reflected in fall in PN related stocks like, RIL,RIIL,SATYAM,DLF,UNITECH,RELPOWER,RELCOM, ETC., TO MENTION A FEW.
Indices are at 3 year lows, with rupee breaching all time high levels, indicate withdrawl of FII hot money, and lack of interest.
Indices might not fall much from here on as I feel 90 to 95% of unregistered investment is already out.
The next major fall can occur after a big rally upto 3000(nifty) & 10000(Sensex) thus, markets will be in small range only till election results are out.
bkvrkrao
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