As suggested by us earlier to use this sharp fall in stock markets as excellent buying oppurtunity has paid of well.Investors have made descent returns over the past 10 days.
But now its time to get Cautious as both Domestic and international factors are pointing mixed cues.
Firstly Domestics factors:- Monsoon is deficient in most parts of the country. This will further have an adverse impact on sentiment and low rural income. Also agri products will cost more.
Government is not doing enough to increase FDI limits in Telecom and Insurance sectors. Also progress on airport privatization is very slow and Disinvestment is not going anywhere.
Rupee is weakening because Dollar is gaining strength against major currencies in hopes that U.S. Fed will continue its Tightening on Interest Rate Program t contain Inflation there.
Due to this, Imports have become costlier for Capital goods imports and other industrial equipments required by industries for expansion, this is double whammy for them as already they are borrowing costly money from banks.
Recent rise in fuel price has already resulted in rise in prices of agriculture products and is causing Interest Rates to move up.
We expect corporate earnings to slow down in coming quarters after continuos growth over 4 years.
Also domestic policys like quota in private companies will also cause nervousness among global investors.
Housing has contributed hugely to this economic growth, but as interest rates move up, already over-heated real estate market will come down, no drastic fall is seen there, but demand will see some cool down for housing loans.
International Factors:- Any surprise attack by U.S. on Iran will cause Crude oil to shoot up, thereby causing sharp increase in inflation and interest rates. We have to watch this space very closely.
We maintain our bullish stance on Crude Oil as no major Oil discovery has been made for long time anywhere in the world and there is no major replacement for this fuel at present.
Also U.S.,India,China are keeping its demand at peak levels.
China is growing rapidly over the last 2 decades and has not allowed to free float its currency against Dollar. Any move in this direction will cause volatility in financial markets around the region. Also Chinas central bank has increased interests rates this time around so as to contain credit growth and fixed asset investments. This will ensure controlled economic expansion. This step will help contain commodity prices running on consumption by Chinese economy.
Japans economy is not showing definite sign of coming out of recession, Japans central bank kept zero interest regime for the time being. This will result in more and more Yen flowing to growth economies like India, China , Russia, Brazil, Philippines, Taiwan , thereby causing more volatility in their financial markets.
Any sharp increase in interest rates in the U.S. will force its portfolio investors to trim risk appetite for emerging economies like us and move their funds to U.S. treasuries. This will cause increase in volatility and derating of emerging markets. This process has already started and will depend on how much the U.S. FED will increase benchmark interest rates.
In U.S. already overheated housing markets and refinancing has made asset bubble more dangerous to ignore. Any slowdown in consumer spending will hurt emerging countries like Philippines, Hong Kong, Thailand, Singapore, who export extensively to U.S. to support their economic growth. This will weaken their currency and will make Indian exports to U.S. more competitive.
Commodities have seen sharp run up and have fallen equally sharply. Only exception to this is Crude Oil. We maintain bullish stance on certain agri commodities like wheat, sugar, orange. Also gold,, crude oil, platinum will continue to attract portfolio as well as retail investment due to concerns on economy and interest rates.
We suggest Domestic themes like Pharma and FMCG during these uncertain times.
But now its time to get Cautious as both Domestic and international factors are pointing mixed cues.
Firstly Domestics factors:- Monsoon is deficient in most parts of the country. This will further have an adverse impact on sentiment and low rural income. Also agri products will cost more.
Government is not doing enough to increase FDI limits in Telecom and Insurance sectors. Also progress on airport privatization is very slow and Disinvestment is not going anywhere.
Rupee is weakening because Dollar is gaining strength against major currencies in hopes that U.S. Fed will continue its Tightening on Interest Rate Program t contain Inflation there.
Due to this, Imports have become costlier for Capital goods imports and other industrial equipments required by industries for expansion, this is double whammy for them as already they are borrowing costly money from banks.
Recent rise in fuel price has already resulted in rise in prices of agriculture products and is causing Interest Rates to move up.
We expect corporate earnings to slow down in coming quarters after continuos growth over 4 years.
Also domestic policys like quota in private companies will also cause nervousness among global investors.
Housing has contributed hugely to this economic growth, but as interest rates move up, already over-heated real estate market will come down, no drastic fall is seen there, but demand will see some cool down for housing loans.
International Factors:- Any surprise attack by U.S. on Iran will cause Crude oil to shoot up, thereby causing sharp increase in inflation and interest rates. We have to watch this space very closely.
We maintain our bullish stance on Crude Oil as no major Oil discovery has been made for long time anywhere in the world and there is no major replacement for this fuel at present.
Also U.S.,India,China are keeping its demand at peak levels.
China is growing rapidly over the last 2 decades and has not allowed to free float its currency against Dollar. Any move in this direction will cause volatility in financial markets around the region. Also Chinas central bank has increased interests rates this time around so as to contain credit growth and fixed asset investments. This will ensure controlled economic expansion. This step will help contain commodity prices running on consumption by Chinese economy.
Japans economy is not showing definite sign of coming out of recession, Japans central bank kept zero interest regime for the time being. This will result in more and more Yen flowing to growth economies like India, China , Russia, Brazil, Philippines, Taiwan , thereby causing more volatility in their financial markets.
Any sharp increase in interest rates in the U.S. will force its portfolio investors to trim risk appetite for emerging economies like us and move their funds to U.S. treasuries. This will cause increase in volatility and derating of emerging markets. This process has already started and will depend on how much the U.S. FED will increase benchmark interest rates.
In U.S. already overheated housing markets and refinancing has made asset bubble more dangerous to ignore. Any slowdown in consumer spending will hurt emerging countries like Philippines, Hong Kong, Thailand, Singapore, who export extensively to U.S. to support their economic growth. This will weaken their currency and will make Indian exports to U.S. more competitive.
Commodities have seen sharp run up and have fallen equally sharply. Only exception to this is Crude Oil. We maintain bullish stance on certain agri commodities like wheat, sugar, orange. Also gold,, crude oil, platinum will continue to attract portfolio as well as retail investment due to concerns on economy and interest rates.
We suggest Domestic themes like Pharma and FMCG during these uncertain times.
