People keep asking me ‘Have the markets bottomed out?’
To me the answer is NO. I am not saying that you should wait for the bottom – I have my shopping list and have already bought some shares, but no we may not be at the bottom. Friday was a shopping day..and I did buy..
Am I not happy with the 7.5% growth rate? You got to be joking – it is one of the best in the world.
What is worrisome is the way the great MMS is ‘managing’ the economy. If India grew at 8% for 5-6 years, and US grew at 1% during this period, why is the Re-$ rate at 1=45? why not 1=35? Simple. Our internal fiscal discipline is ZILCH. Of course there is the macro explanation of wanting to keep the $ at that rate so that our exports do not look too expensive…be that as it may..
The US market has many shares available at 2.5% yield – remember their Gilt is giving you <2%. Very few good quality Indian shares are available at 2.5% yield – and we have SBI bonds available at 10%p.a.
Let us take the growth argument – Exxon, Chevron, Goldman Sachs, …will all grow at 17-18% + rate – I would be surprised to see Goldman Sachs growing at anything less than 25% for 2012. All these shares are available at a low p-e, double the gilt dividend yield, and with zero currency risk for an average American investor. You have to be very stupid to look outside of the US for investing – at least till the end of 2012.
Having said that, 2012 will be a tough year for the global economy. India might be able to weather it better than other countries, but the price earning ratios, dividend yield ratios, etc. are not mouthwatering. MBA colleges are still able to place all the people – even 2008 was more difficult. Salaries are still going up in double digit numbers, banks and life insurance companies are still opening branches.
Brokerage houses still have targets for account opening – but the number of active accounts may not be going up. The turnover at the exchanges are not going up – and frankly the FII should be able to find more lucrative markets abroad.
Let there be a few thousand job losses, let interest rates go down (somebody is still borrowing at 12% for industrial use, right?) and let builders repay 28%p.a. loans……then I would be willing to say ‘markets are at mouthwatering levels. Currently I am a nibbler, not an eater. And nibbler I always will be – at 9000, 18000, 21000 as well as 59000. After all I bought even when the index was 100, did I not?
Moral: do not wait for the waves to stop if you hope to take a dip in the ocean.
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