Saturday, February 20, 2016

Sailing An Unsettled Ocean of Global Woes

What an interesting two weeks the stock markets have had.The Indian Indexes have shed points worse than a dog shedding fleas!!

Crude has yo-yoed.Commodities prices kept the downward curve and Gold rose to a six month high.The war in Syria - Iraq has now spread to Turkey with blasts in Ankara.the 'Zika' virus is taking a physical and psychological toll in South America,especially Brazil.

"Investing in this market is only for those who understand that they have to bear short term pain for long term gain"

Especially so in the Indian context.NPAs or bad debts came out of the closet to bite the PSUs and send their stock prices tunbling below book value(BV).Adjusted Book Value(aBV) is offcourse far lower hence not much to be read into this data.

It was not even a well kept secret.The good news being that these Banks are now free to aggressively clean their Balance Sheets,sell NPAs to ARC(Asset Reconstruction Cos),take legal action against defaulters and get recapitalized.A lengthy process that will give value investors a good chance.

I would only look at SBI at this point for a staggered investment if it had to be a PSU at all.

I must also confess that I am clueless on the GDP numbers that do not feel like a 7%+ growth on the ground.Statistics can be made to supporthe Bu any argument and the calculations are magnificently confusing.

With the Budget on 29th February the expected "pre budget rally" is yet to materialise.The nifty having touched 6800 will stay above that should 7000 levels hold.Staying on the sidelines,buying through SiPs or using options to hedge your trades seems the only logical route.

Reliance Industries and L&T are the two largecaps that look a safe investment at current levels(RIL 940 and LT 1150)

I confess I have no idea what the Finance Minister will uncork from his "budget bottle" though a push for infrastructure,education and defence is doing the rounds.It would be very frustrating if he does not provide tax incentives for the middle class that pays the bulk of taxes.

Fundamentally the Indian markets seem the best bet for investment but will depend on what FIIs think and how weak the US $ gets after touching historic highs.

The volatility and unsettled conditions are likely to last for two more quarters at least.For a long term investor a fall to Nifty 6200 levels will create value in strong companies(my fair value for Nifty is 6500).

Lets wait for the budget.