As we have been maintaining time and again, we are still to see the worst. The bulls will have to wait for at least another six months before they can really assert themselves.
There appears to be only one solution left to the Central Banks across the world to get out of this mess - print more currency. With inflation likely to remain in control, they will find enough support of the economists to justify printing more currency. Otherwise interest rates will start rising putting more pressure on an already beleaguered financial and economic system. The problem gets postponed to another time, another government and another set of people.
India appears to be a bit insulated from the problems and that gives us reason to be optimistic of a turnaround SIX months from now - a timeline that we had originally indicated in July 2008.
We mentioned two stocks last week - Reliance Infra and Bartronics. Reliance Infra has now declined to more attractive levels and is likely to be available at a good price in the next few days. Bartronics is good, but the problem is its weak balance sheet. And that probably is the reason why it is available at a low PE multiple. It is a stock that one should keep in radar, to be bought after the markets have bottomed out. It also has a substantial US exposure, which could present all kinds of problems in the near term.
Reliance Industries is another stock that has been strong - thanks to the KG basin news flow. However, rumours have also been going around about the huge losses that the group has incurred in the derivatives market. We don't know how much truth is there in this, but there is generally no smoke without fire. So here too one can wait for a while before taking the plunge. It is a much safer buy closer to 1000 levels or after a few months, when more bad news gets priced in. If there is any truth here, it has to come out pretty soon.
The conservatism of the Indian banking system is paying off for us. The crazy derivative instruments created by the over smart investment bankers are finally devouring the banks. The debt and equity markets provide different risk return profiles. Unfortunately, the investment bankers have left no difference between the two - debt has become as risky as equity and that too for marginal returns. The government has played into their hands by keeping interest rates too low - no reward for saving. All investments became risky and this is the price that has to be paid. We are seeing the same thing happen here as well. The only fortunate thing for us is that we don't have a deep derivatives market. A simple blunder that continues to be perpetrated in the name of economic revival - so the problems will keep recurring every now and then.
Vivek Bhargava
There appears to be only one solution left to the Central Banks across the world to get out of this mess - print more currency. With inflation likely to remain in control, they will find enough support of the economists to justify printing more currency. Otherwise interest rates will start rising putting more pressure on an already beleaguered financial and economic system. The problem gets postponed to another time, another government and another set of people.
India appears to be a bit insulated from the problems and that gives us reason to be optimistic of a turnaround SIX months from now - a timeline that we had originally indicated in July 2008.
We mentioned two stocks last week - Reliance Infra and Bartronics. Reliance Infra has now declined to more attractive levels and is likely to be available at a good price in the next few days. Bartronics is good, but the problem is its weak balance sheet. And that probably is the reason why it is available at a low PE multiple. It is a stock that one should keep in radar, to be bought after the markets have bottomed out. It also has a substantial US exposure, which could present all kinds of problems in the near term.
Reliance Industries is another stock that has been strong - thanks to the KG basin news flow. However, rumours have also been going around about the huge losses that the group has incurred in the derivatives market. We don't know how much truth is there in this, but there is generally no smoke without fire. So here too one can wait for a while before taking the plunge. It is a much safer buy closer to 1000 levels or after a few months, when more bad news gets priced in. If there is any truth here, it has to come out pretty soon.
The conservatism of the Indian banking system is paying off for us. The crazy derivative instruments created by the over smart investment bankers are finally devouring the banks. The debt and equity markets provide different risk return profiles. Unfortunately, the investment bankers have left no difference between the two - debt has become as risky as equity and that too for marginal returns. The government has played into their hands by keeping interest rates too low - no reward for saving. All investments became risky and this is the price that has to be paid. We are seeing the same thing happen here as well. The only fortunate thing for us is that we don't have a deep derivatives market. A simple blunder that continues to be perpetrated in the name of economic revival - so the problems will keep recurring every now and then.
Vivek Bhargava
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