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Tuesday, July 22, 2014

G E M S

Global Emerging markets have been on a roll despite the best efforts of ISIS in Iraq,the Pro-Russians in Ukraine,the Israel-Gaza brouhaha.

From 7.5% in 2006 to 5% post 2008 Subprime crisis the share of GEMS in weightage is currently 10%.Despite a timid Budget which was long on rhetoric and short on specifics the Indian markets have kept their upward trend alive.

The market becomes illogical at the top(and bottom) and sometimes runs ahead of the earnings.From an average 15-17% last financial year,we should see healthy revisions(upwards) in corporate earnings and the attempts at paring debt may also lead to substantial re-ratings for firms especially in the infrastructure space.

I keep talking of China as a pressure cooker which if it bursts might cause huge global problems.They have managed to keep a lid on internal issues with strict censorship and managed control of both social as well as main media.Yet a 251% Debt-GDP ratio is problematic even though the debt is mostly internal.Using debt to grow is a double edged sword,combined with rampant corruption,environment destructive policies and a restive Uigher region with growing Muslim-jihadist issues.

As we speak the monsoon deficiency in July has reduced to 27% down from 43% and Australian Scientists talking of a smaller El Nino shadow.

Technically I feel Nifty will face resistance around 8000 levels and there is plenty of cash on the sidelines that every dip will be bought into.A major correction should not have below 8200-8500 on the Nifty.

The stocks reccomended in this blog have reached and in most cases exceeded short term targets....IDFC,TataGlobal,HCC,ILFS Trans.