Coming: The Emerging Markets Bust!

First of all, I hate predicting – especially if it is about the future! Having said that it is necessary to look at some of the over optimism that is there in the market and at some of the problems too.

So today let us look at the issues:

A stagnating Europe and USA will mean bad news for China (for its exports), Brazil (commodities not being in great demand), India (inflow of investments) Russia (falling oil prices will hurt).

Let us make no mistake. A declining EU and a stagnating US cannot be good for rest of the world. The EU and US will try to continually try to maintain their political hold even as their economic hold is fast dwindling. Political fallout of all this ‘dadagiri’ apart there will be huge economic fall out also.

Indian businessmen and other Indian asset buyers are used to benign interest rates. However the ever increasing interest rates by the RBI will start hurting. As the quarterly results start coming you will see earnings eroded by rising interest rates. Funding for infrastructure projects will not be easy to get in a world where money keeps going to the ‘safe haven’ . Rising interest rates will also dampen fresh investment in infrastructure – even guaranteed returns will not mean anything unless the guarantees are by the Central Government. The guarantees of payments will not mention the delays that the government machinery is capable of doing!

All this does not abode well….Here I am not predicting doomsday, but clearly Apocalypse is not really built into Indian prices. Well not yet at least!

All the best!

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5 Responses to “Coming: The Emerging Markets Bust!”

  1. Now, other than continuing our SIPs in Prashant Jain’s protfolio, investing in some chosen scrips and Beginning with a prayer we have little options to choose :).

    Is cash again the new king Subra?

  2. cash is NEVER a king in the long run…but yes over the last one year..if the sensex has given say -4%, cash can look like ‘it was king’ but over a 3-4-5 year basis, returns will look much better in the Sensex..

  3. So Subra,

    Have you sold all your stocks? ;-)

  4. They say that mother of all evil is speculation. And most of us would be better off not doing the same.
    India is no island and a non-conducive and ‘bad’ world economic environment will definitely have a negative impact on all of us. It is therefore better to stay calm and start investing in good blue chip equities for the long run.
    PS-Though I am asking people to invest in equities, the best investment that one can make in bad times is on oneself.

  5. Subra sir, Thanks a lot for making us aware about finance. websites like yours enlightens us about the importance of personal finance and am happy that i am in better financial shape than 2 years back. Pl come out more with topics of short stories.

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