"The person you consider
ignorant and insignificant is the one who came from God, that he might learn
bliss from grief and knowledge from gloom."
-Khalil Gibran (Lebanese,
1883-1931)
Word for the day
Well-nigh (adv)
Very nearly; Almost
(Source: Dictionary.com)
Malice towards
none
It appears that the Bihar is
headed towards "winner takes it all" results.
180-200 seats for NDA or
Grand Alliance will surely resonate loud in the winter session of the
Parliament.
Till QE4
Attending an investors' meet in Delhi yesterday evening was quite
a revelation. Despite heightened volatility, sub-par macro data, global turmoil
and tight liquidity conditions - the greed still appeared the primary
sentiment.
There were though some signs of fear gaining currency in the
whispers about the worsening credit quality of Indian corporates, especially
those with USD debt on their books. Awareness about the market turmoil and
frequent margin problems was also reasonably good.
The participants were cautious in deploying fresh money after
recent spurt in volatility, but there was no sign of capitulation. The
narrative moved around "there is no alternative" (TINA). Nationalism
rather than economics was conspicuous as the guiding principle.
After listening to the views of so many experienced, large and
professional investors, it appears to me that the trade is gradually
transitioning from micro to macro. It is mostly "India over other emerging
markets" due to her macro stability and better fundamentals.
Logically as this transition progresses, the divergence between
the performance of cyclical and secular sectors should weaken. Likewise, the
returns of specific portfolios and benchmark should also converge.
I shall be watching Indian markets keenly over next couple of
months to find reflections of this trend. It might provide three major trade
opportunities in Indian context - (i) Long financials and energy and short
consumers; (ii) Long Bank Nifty and Short Nifty; and (iii) short volatility.
I would however maintain that in strict technical sense the
benchmark indices may see 10-12% correction from the current levels over next
6-9 months. The correction in broader markets could be much deeper and wider.
I am also worried about the complacency over the impact of the
impending US Federal rate hike. A stronger USD post the "lift" may
potentially trigger an avalanche of carry trade unwinding, impacting many EM
currencies.
Many emerging markets have enjoyed weaker USD, near zero interest
rates and higher commodity prices for over a decade. They have accumulated debt
in billions of USD debt. The rise in EM debt consequent to USD appreciation,
along with higher debt servicing cost and lower commodity realization, will
definitely be disruptive. unless adequately compensated by aggressive USD flows
towards these markets.
I am therefore in the school which believes that QE4 is not only
inevitable but imminent also.
The time between the rate hike by US Fed and the commencement of
QE4 will however be extremely tough on EM investors - be it equity, bonds or
currencies.
As of now I do not see any need to change my investment strategy.
By the way, the best part of the evening was a simple Jain dinner
(to my liking, without onion!) served after the meeting;. I love the food that
is easy to cook, eat and digest.
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