Do it yourself

In the past couple of days, some readers have uncharitably criticized me for being excessively paranoid; and some others have even accused me of fear mongering. It has been pointed out that I was writing the same stuff in the spring of 2022, while markets did much better in the subsequent two and a half years. Though I need not respond to every criticism, I would take this opportunity to reiterate my view that the economic conditions in India started to worsen from FY23. Now it is reflecting conspicuously in data. The cyclical improvement in corporate earnings post Covid stimulus and unexpected onslaught of ‘revenge consumption’, was erroneously assumed to be a structural and durable earnings cycle. These erroneous assumptions have actually resulted in a valuation bubble; bursting of which shall cause more pain than timely realization of error and course correction would have. Remember, over a longer period, stock prices do always converge with the economic realities. However, in the i...

From my interaction with many market participants over past few days, I noted that most of the active traders and even some of the seasoned investors are now focused on the cyclical businesses like Textile, Paper, Cement, Sugar, Rice, Energy etc. Global food shortages and forecasts of a good monsoon have evoked interest in agro chemicals also. Given that a large proportion of stocks in these sectors are small and midcap; floating stocks are not significant; and institutional interest is low the moves are sharper – something traders like very much. Defense is perhaps the most talked about sector amongst traders. The need to indigenize defense technology and become self-sufficient in weapon and defense equipment production in view of the international sanctions on Russia (our largest defense supplier) is driving the sentiment. The PSUs producing for the defense sector are getting re-rated. Private players are also getting heightened traders’ attention. The attention towards FMCG and ...