Thought for the day
"Young lawyers attend the courts, not
because they have business there, but because they have no business."
-
Washington Irving (American, 1783-1859)
Word for the day
Ballast (n)
Anything that gives
mental, moral, economic or political stability or steadiness:
(Source: Dictionary.com)
Teaser for the day
Would be more pertinent question to ask "Will Mufti
Government unhesitatingly arrest Masarat Alam et. al. again if they are found
to be indulging in unlawful activities?"
Head, tail or the edge - III
I have been cautioning my readers that global financial markets
might be heading for a "perfect storm" this summer. I am expecting a
deeper correction in Indian equities also. This to me will be an opportunity to
stock up, even by leveraging a little.
I do not expect the markets to panic like it did post Lehman
collapse in 2008-09. I find the participants much better informed, prepared,
and hedged. In specific Indian context, the derivative open interest is now
predominantly in index options and stock options, as against stock futures in
2008.
Moreover, the political situation now is much better and macro
indicators are close to bottom against close to peak in 2008.
Twister
As discussed in past couple of days, there are strong headwinds
and tailwinds
present in the Indian economic system that should prevent any larger or faster
move in Indian equity prices in next 6-9 months.
However, there are some strong pressure areas building up near
term (next 3 months) that may cause much greater volatility and deeper
correction in the equity prices.
In particular the following factors need to watched carefully:
(a) Intensity of the
discussions around US Fed rate hike.
(b) Poor results for
4QFY15 and consequent earnings downgrades.
(c) Rise in consumer
inflation due to unseasonal rains and El Nino fears.
(d) Political
hostilities rising as the Parliament meets after the recess to complete the
budget session agenda.
Short term outlook (upto 12 months)
Market may witness higher volatility and larger moves in next
6-12 months. While not much further negative than already anticipated is
expected to occur on domestic front, global uncertainties may rise with
deceleration in Europe, Japan, China and major commodity producing emerging
markets. Nifty should move between a larger range of 7420 - 9400. Strong buying
and leveraging opportunities will emerge in to 7850-8000 Nifty range.
Mid-term outlook (12-24 months)
Expect Nifty to make a strong positive move over next two year
with upper bound at 10800. The risk reward at present from this perspective is
positive. Much sharper move could be expected in broader markets.
Strategy
(a) Stay out of the
way of expected twister in next couple of months.
(b) Take shelter in
strong defensive equity and short term accrual debt.
(c) Keep emergency
kit ready (adequate cash and Nifty puts) to gain from a sudden fall.
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