Wednesday, March 21, 2012

On The Edge

Markets are again headed towards volatilty with the India VIX placed at 21.Post Budget the markets have flattened out to a certain extent and the next trigger is again dependent on RBI cutting rates and the latest inflation figures.

Goldman Sachs report says that this is the best time to buy equities in the US with the treasury yields being what they are.I have held that view(and my previous posts would be a testament to that)since 2008 with the feeling that FIIs would prefer to invest in their home markets where the risks are understood rather than EMs with their political and economic variability.

Yet I get to hear the experts predict a huge flow of liquidity into EMs,especially India.Guess that the Fund Managers belief in US equities is particularly low which has benefited some dodgy balance Sheet firms here.

As a contrarian bet I would invest in Real Estate stocks- DLF,Infrastrucure-maybe an IVRCL and my old reccomendation RCOM that has moved from 75 to 100.It remains a traders market and only those with belief need get in at this time.Pessimism still remains high and that is a good signal.the failure of Nifty to go below 5100-5200 range for now means that any news based fall would be a good time to invest some funds.

Made a short trip to Odisha and the development in Bhubaneswar,Puri,Ganjam and Khurda is amazing.The potential was always there and Bhubaneswar has rapidly become an educational hub in the East.Those with a 4-5 year return horizon can invest in good projects as the prices,especially a little away from the main city,are at a fair level and a 60-70% net return in 5 years would be my conservative estimate.

The Monsoons as an indicator is a few months away.....and for now liquidity,local politics and the RBI hold the key to Indian equities.

Thursday, March 15, 2012

Budget 2012:A Non Sequitur

Another Year, another Budget from the man who always wanted to be king but never was and the chances dim with each passing year.I talk of the honorable FM,Mr Mukherjee who once had ambitions of being Prime Minister.The chances of UPA coming to power in 2014 are slim unless they can put the economy back on track and at the very least project a strong and clean image.

Will he be bold and throwing caution to the wind come out hitting with bold reforms viz.FDI in retail,pension reforms,agri-distribution,cold storages,blueprint on SEZs,Freight Corridors.Will he push infrastructure,increase excise,decontrol diesel and Gas prices?

Will it be a subsidy laden budget with more schemes for the so called 'aam admi',full of reservations for various ST/SCs,freebies in education and additional deficit in the current account.We might not be running a debt of 230% of gross GDP like the Japanese but it wont take long to destabilize our fragile development.

The rising crude prices are raising inflation again although there is elbow room to cut income taxes to promote internal savings to icrease from current 8% to at least 10%

A best guess is a neutral budget.....but if Mulayam Singh's SP has come to an understanding with the Government then Mr Mukherjee can ignore Mamata Banerjee's Trinamool as he should cause politics should not hold the Nation's growth hostage.

At worst...the slew of various...Jawahar-Indira Plans will put further pressure on those who pay their taxes honestly or get them deducted as TDS...!!!!

Keep investing regularly and do not let the Budgets and other such events distract you from your main purpose.