Writing financial reviews is, as I'm learning, fertile ground for upper management and even politics. You need to learn the art of tact. You need to 'seem to be taking' a position based on a lot of thought. When in actuality you are ensuring that you are covering your backside with the option to swing which ever way the wind blows.
However, even the seasoned politician and manager knows that he should be prepared to be surprised. And so it is with the financial reviewer.
Technically, the charts are saying that we are testing a key resistance of around 29,000 on the Sensex. The markets have so far not been able to sustain themselves beyond this. The markets are sometimes like the kid on the basketball court trying to reach for the hoop. He's managed to reach the hoop a couple of times but it still isn't easy or natural. But, someday it will become easy and then it becomes the norm. Then the good coach that the market is will raise the hoop even higher and higher and so on.
Fundamentally, the markets are like Rajnikanth's 'Kabali'. It's managed to do business (i.e. deliver returns) while the verdict is still out on the quality of the content. There's a lot of noise regarding earnings growth of India Inc. Compared to base rates we know that the markets are over-valued presently. But FII money is driving the markets. And if the Japanese/ European guy can borrow money and get paid for it (read negative interest rates) and then invest in something that gives you 5-6 bucks for every 100 invested (read sensex companies) it still seems like a good deal. How long this party is going to last is anyone's guess.
Our decisions are on base rates (i.e. historical averages) and therefore we will be pruning our over-all allocation to equities. Within the equities space the small & midcap sectors have done phenomenally well. We've managed to capture the run-up but now we believe that the space is being over- valued. We are therefore reducing allocations to the small & midcap space in a phased manner.
In the debt space we have seen the Indian Bond slowly settle at around 7.1 (i.e. 10 year G-Sec). We've played the game rather well this far (notice the pat on the back and the 'this far' as we know markets have a tendency to surprise us). For the short-term we're seeing conflicting signals coming from the Govt (repo rates and inflation numbers) vs the markets (interest rates tending down). We will need to be cautious now if we're playing an interest rate fall.
Gold seems to be steady at $ 1300/oz. All we can say is that house-wives and central bankers seem to be happy with that.
Central banks will be watching what the Fed (US) has to say on interest rates. We expect the dollar to strengthen steadily (against other currencies) as US economic data continues to improve. As NRI's we would advise 'not to wait' to transfer money back to India. The differential in interest rates and the currency should be negligible. Also, with a falling interest rate scenario in India it might be wiser to lock in the higher rates while they are available. We expect the Rupee to trade in the range between 65-70 dollars for the short term.
Crude oil (brent) seems to have bounced back from it's resistance of $50/barrel. We know the Arab Sheikhs are getting nervous (most budgets in Gulf countries are designed on $80/ barrel and therefore we will see significant fiscal deficits in these countries). This could also mean that China (which has been a significant importer of crude oil in the past few years) is slowing down. The commodity space looks to be in a bearish phase. This doesn't augur well for the over-all health of the global economy.
However, even the seasoned politician and manager knows that he should be prepared to be surprised. And so it is with the financial reviewer.
Technically, the charts are saying that we are testing a key resistance of around 29,000 on the Sensex. The markets have so far not been able to sustain themselves beyond this. The markets are sometimes like the kid on the basketball court trying to reach for the hoop. He's managed to reach the hoop a couple of times but it still isn't easy or natural. But, someday it will become easy and then it becomes the norm. Then the good coach that the market is will raise the hoop even higher and higher and so on.
Fundamentally, the markets are like Rajnikanth's 'Kabali'. It's managed to do business (i.e. deliver returns) while the verdict is still out on the quality of the content. There's a lot of noise regarding earnings growth of India Inc. Compared to base rates we know that the markets are over-valued presently. But FII money is driving the markets. And if the Japanese/ European guy can borrow money and get paid for it (read negative interest rates) and then invest in something that gives you 5-6 bucks for every 100 invested (read sensex companies) it still seems like a good deal. How long this party is going to last is anyone's guess.
Our decisions are on base rates (i.e. historical averages) and therefore we will be pruning our over-all allocation to equities. Within the equities space the small & midcap sectors have done phenomenally well. We've managed to capture the run-up but now we believe that the space is being over- valued. We are therefore reducing allocations to the small & midcap space in a phased manner.
In the debt space we have seen the Indian Bond slowly settle at around 7.1 (i.e. 10 year G-Sec). We've played the game rather well this far (notice the pat on the back and the 'this far' as we know markets have a tendency to surprise us). For the short-term we're seeing conflicting signals coming from the Govt (repo rates and inflation numbers) vs the markets (interest rates tending down). We will need to be cautious now if we're playing an interest rate fall.
Gold seems to be steady at $ 1300/oz. All we can say is that house-wives and central bankers seem to be happy with that.
Central banks will be watching what the Fed (US) has to say on interest rates. We expect the dollar to strengthen steadily (against other currencies) as US economic data continues to improve. As NRI's we would advise 'not to wait' to transfer money back to India. The differential in interest rates and the currency should be negligible. Also, with a falling interest rate scenario in India it might be wiser to lock in the higher rates while they are available. We expect the Rupee to trade in the range between 65-70 dollars for the short term.
Crude oil (brent) seems to have bounced back from it's resistance of $50/barrel. We know the Arab Sheikhs are getting nervous (most budgets in Gulf countries are designed on $80/ barrel and therefore we will see significant fiscal deficits in these countries). This could also mean that China (which has been a significant importer of crude oil in the past few years) is slowing down. The commodity space looks to be in a bearish phase. This doesn't augur well for the over-all health of the global economy.
