How will markets go from here? Whether they will go up or down? That’s the 10 trillion $ question of every investor!
In my view, the days ahead are not comforting for India. Till now whole world markets were synchronized and moving all along with. But, things are going to change from here, the economies (those having surplus budget can pass through from this crisis.) which have big deficits like current deficit and fiscal deficit are going to suffer much. I have already gave this in my past report dated 3rd November 2008 that India is out of favor when compared to china (http://stockstowin.blogspot.com/2008/11/in-india-ems-recession-is-just-starting.html). So, India has less room to give such big bailout plans because we are already having more than 7% current and fiscal deficit this year. Which is very worrying thing right now.
What are the positive things we can have in the near term:
1. As the commodities skidded globally, our policy controllers have room to cut the further CRRs /SLR/ repo and reverse repo etc.,
2. Which drags the inflations due to the sharp decline in commodities
3. No catalyst visible in the near term (like bailout package) for our Indian economy.
What are the negative things we can have in the near term:
1. As India may not give any bailout package in the near term because it has already a dangerous current and fiscal deficit which is around 7% whereas the budget target is around the 2.5%
2. So, in the near term as I gave in my report (http://stockstowin.blogspot.com/2008/11/what-is-difference-between-slow-down.html) in recession periods will have huge top line cuts. This tells the fact that we are going to have such drastic top line cuts in the balance sheets in the upcoming quarters which are not priced in.
3. Instead of such rate cuts our leaders can not give any bailout packages, so our economy may not do wonders as it done in the past.
4. Down grades will start by the rating agencies till yesterday every body saying that we are going to have minimum 6.5% GDP in the FY09 and FY10. But, the fact is that we may not have (even the 30% lowered GDP forecast from 9%) the 6.5% we are going to have much lower than this.
5. Generally FIIs will close their books and will have the holiday session in Nov/dec and some unwinding can be seen in these months hence volumes should dry up further and no participation will be have. So, no fresh buying from the big guys.
What are the strategies which our asset allocation should be good for the next (1-3 months):
1. Equities are not the right choice in these panic conditions
2. we are having a low/zero interest regime so better to shift your funds from equities to short term debit funds which can deliver 12-18% returns.
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Happy investing
With thanks
Be and make
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