Home > Market View > Hopes of a rate cut fuel global equity markets

Hopes of a rate cut fuel global equity markets

Thursday, November 29, 2007 Leave a comment Go to comments

US markets continued their upward rally with Dow rising 330 points on hopes of 25 basis point cut in the Dec 11 meeting. The Fed is left with no option but to improve the credit markets and arrest the crash in US housing market. So what does it mean?

It means more dollar outflows, a more weak dollar and may be some strong inflows into emerging markets. Tell me why would you be in dollar assets if you are an international investor? Even if US stock markets gains but dollar falls, you gain nothing.

The only saving grace for US economy has been the robust spending by the US consumer. Till he continues to spend US might avoid a full blown recession. At the same time, they have to face the consequences of job losses and falling housing prices.

Fed will do it best to save US but I feel they might just be “behind the curve”. I’d rate our own RBI policy makers as much superior who stay ahead of the curve and prevent bubbles. Kudos to Mr. Reddy!

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Categories: Market View
  1. Murtaza
    Monday, December 3, 2007 at 1:00 pm

    True, the US will affect India – even countries affected by the US slowdown will in turn indirectly cut down on expenses which would include some India based companies showing slowdowns etc.

    But then again, dollar inflow will be higher still bcoz of the rate cut and india story is intact and maybe the FII will make it foolproof (maybe temporarily) by investing more heavily in all stocks.

    The demand by the FIIs itself will be pushing the prices higher and higher still …

    Of course, small dips and corrections will always be there and for the good as the mkts always need breathers.

  2. sagecapital
    Sunday, December 2, 2007 at 8:03 pm

    In US things might not recover as late as 2008 end. What we need to see is the impact of a US slowdown/recession on Indian economy especially the IT sector.
    I agree short term risks(event based) are too high.

  3. Sunday, December 2, 2007 at 6:59 pm

    hi sage,
    The reduction in the fed rate would confirm the bad shape of US economy. Also put undue pressure on Dollar.
    This would again lead to a fall in worldwide markets. In cas it does not then too the markets will be dissapointed and see a down trend. better to wait and watch and let the event pass. better to make less profit than to lose your capital.
    what do you say?
    regards
    Anil

  4. sagecapital
    Friday, November 30, 2007 at 9:00 am

    RCOM has good support at 650 and might give a small bounce. So it could be a good short term countertrend trade for 3-4%.
    We need to show some strong moves on the counter, so that it can regain its earlier highs of 800+.
    I feel till this “spectrum” issue is resolved, players might be unwilling to take big bets on telecom stocks!

  5. Varun
    Friday, November 30, 2007 at 8:34 am

    Sage,

    Would you recomment buying RCOM at 650 levels?

    Thanks

  6. sagecapital
    Friday, November 30, 2007 at 8:09 am

    We have been patiently waiting for RCOM to show some momentum but so far it has not.
    Anyways, we must learn to take advantage of people’s expectations(read greed) by staying rational. In 1999-2000 it was technology(TMT), today it is “Reliance”, tomorrow it might be something else.
    We made decent money in REL,Relcap,RIL,RNRL,RPL so I am not complaining!

  7. Murtaza
    Thursday, November 29, 2007 at 10:00 pm

    Yes, even now people recommend stocks saying “buy whatever has a reliance in front of it”. So you can understand how it is going. And again people are expecting the power ipo to move how REL moved.

    Also RelCom is highly recommended coz it is the only Reliance scrip which has not made those ‘super moves’.

    Yes, over-expectations are what people are experiencing right now and especially from the Reliance group.

    Dhirubhai must be enjoying a very ‘santusht’ sleep in his resting place.

    Murtaza

    Errata.: In my earlier post, in Pt 1 I have mistakenly said ‘In point 1 above”. It should be read as ‘in point 4 below’.

  8. sagecapital
    Thursday, November 29, 2007 at 8:43 pm

    Murtaza-
    The euphoria had evaporated when RPL reversed!
    from June to November many stocks have doubled, so FIIs might be finding it prudent to take profits home.

    The general public might be watching movements but still not much of retail has got the confidence to enter.
    Although I still do not understand the “over optimism” behind Reliance power IPO. Is it all because of “Reliance name”?

  9. Murtaza
    Thursday, November 29, 2007 at 8:09 pm

    Yes, looks like a small dip is in the offing …

    1. As suggested earlier too — bcoz of the sub-prime issue, FIIs may sell off (being held back bcoz of pt.4 below) so that they can show some profit in their books at year end and save some face

    2. Also bcoz of very stock specific moves, ppl are stuck in momentum stocks thereby unable to generate free cash for further buying (they are waiting for the likes of RPL, JaiHydro, GMDC, Jindals etc to reach 4 figures) and they have now become investors since they have seen that holding on will be beneficial to them and a lottery is in the offing.

    3. RelPower IPO coming … where will the cash come from in the retail section to apply stupendously in the IPO? Sell cash holdings of underperforming stocks to invest in IPO and surely the loss will turn to profit.

    4. Elections getting over in Gujarat by Dec 10. till then the Cong do not want anything untoward to happen anywhere in any field. They are holding the mkts (speculative thinking).

    5. Euphoria too is setting in, impulsiv buying, greed etc can now be seen.

    6. Every tom dick and harry now talking stocks. Some of my associates/clients/relatives/friends etc tell me ‘tum ko kya zaroorat hai kaam karne ka, tum to market me loot rahe ho, crorepati ban gaye ho’ etc etc — so general ppl now started following mkt movements too.

    But then again, time will only tell where the markets will be pushed to in this game ….

    Happy trading/investing
    Murtaza

  10. sagecapital
    Thursday, November 29, 2007 at 7:55 pm

    Today’s market action is not encouraging for the bulls.This market is looking to settle at lower levels.
    Large caps are just not showing any short term strength-right from L&T to RIL.
    This market might turn into a “stock specific” market.

  11. sharesingh
    Thursday, November 29, 2007 at 7:31 pm

    Hi sage,
    During last 15 days the FII are continously selling tonnes of shares almost every day .What is your call on this development.

    regards
    Sharesingh

  12. sagecapital
    Thursday, November 29, 2007 at 10:18 am

    We are looking at small caps rather than large caps at this point of time.

  13. Varun
    Thursday, November 29, 2007 at 9:54 am

    Sage,

    Are you advising to buying today or selling at higher levels?

    Thanks

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