Home > NIFTY Strategy > The downtrend resumes again

The downtrend resumes again

Wednesday, February 20, 2008 Leave a comment Go to comments

Today’s market action has confirmed the fact that we are again on a downhill path. I am not too sure where it will settle but it is very much possible that we retest the earlier lows of 4500.

Budget or no budget, this market is not looking pretty on the long side. I can’t find many stocks which are showing any strength. Every rise is met with selling!

One should be prepared for the worst in the coming days. Money is moving from equities to commodities- see how Gold, Metals, Oil, Wheat are firming up.Read this story on bloomberg. The bull run in commodities might have just begun-especially the agri-commodities.

People are short on equities and long on commodities.The world is entering a phase of “slow growth and high inflation”. This also implies that RBI is not going to cut interest rates anytime soon which in turn might slow down the industrial growth.
As an individual investor-this might be an appropriate time to rethink about your asset allocation.And be careful before you buy a falling stock. Some stocks never recover.

Categories: NIFTY Strategy
  1. sagecapital
    Monday, February 25, 2008 at 8:27 am

    Amol- it is all about having an understanding that “stocks don’t always go up”, so it is prudent to be prepared for a downside also(the element of uncertainty).If you invest thinking that “my stocks” are only going to go up, you might end up with couple of BIG LOSERS.

    Secondly, price trends are better indicators of markets and economy. Markets always manage to discount good news/bad news earlier than we think.

  2. sagecapital
    Monday, February 25, 2008 at 8:18 am

    If you agree with high inflationary times, I don’t understand your bullishness on equities!
    My point about fed was about the “uncertainty” present in this world and despite all the information/tools policy makers still falter.So as an individual investor we need to incorporate this ‘uncertainty” into our investment decisions.

  3. anil bansal
    Saturday, February 23, 2008 at 1:56 pm

    Your example of US FEd is quite out of context. The data has political implications so I doubt its sanctity. The regulators though experts have directions from political masters and rarely take anticipatory action. Most of their actions are post incident.
    I am not even a novice. I go by simple logic. If I gain money it is by gods grace. If I lose it is what god had willed.
    Vinash Kale viprit buddhi.
    US citizens are cheating their financers by not repaying their installments. Is there any reason we should pay for the crimes of US citizens. If not then why is Indian Govt subsidising US$ by their stabilisation fund stoking inflation in India. These are political considerations – protecting exporters in acountry which is a net importer. Very illogical but as per our political masters wisdom – in the interest of the common man.
    So I try and base my judgements on the broad macro economic factors for India. then cross my fingers abd brace for a crash landing or a take off.

  4. Amol
    Friday, February 22, 2008 at 3:55 pm

    then what we should do in such scenariors (your comment to anil)

  5. sagecapital
    Friday, February 22, 2008 at 10:04 am

    Of course,if I know commodities are going to sky rocket-I’d definitely buy them! I have been writing on the blog to buy Gold for quite a while..

    Understanding the business?
    Even people who runt he business face so much “uncertainty” in the economic outlook, how can you be sure of understanding the business when you are so much outside the business?
    Even the US Fed reserve with all the data and tools at its hand says economy is “uncertain”, how can you be sure and confident on the success of a particular business?
    Are you sure that “domestic consumption” shall not be hit by a US slowdown? Are you sure that manufacturing sector will not take a hit if that happens?
    The world is much more complex than we think. Simple assumptions don’t work!

  6. ashish ji
    Thursday, February 21, 2008 at 2:34 pm

    “market is not looking pretty on the long side”


  7. anil bansal
    Thursday, February 21, 2008 at 1:01 pm

    What you say is right. wheat will be expensive. so should we start hoarding it? gold is going up should one buy it. Crude is going up should one buy it?
    My answer to all the above is no as I do not understand those businesses.
    If one doesnt understand the investment it would be more prudent to invest in mutual funds or stick to fixed deposits with banks.
    as you rightly say money is not chasing equities so we should hunt and find bargains in equities. Manufacturing, construction and services will remain the mainstay for the Indian economy which is not overly dependent on exports for survival. Only patience is a friend now.

  8. sagecapital
    Thursday, February 21, 2008 at 9:40 am

    Commodity bull cycles sometimes run for as long as 10 years!
    If US goes for high inflation,do you think Gold will stay at $900?
    How about crude at $150 in say next 1-2? Do you think it will have no impact on equities?
    The point I am trying to make it is that money is chasing “commodities” and not “emerging market equities”.
    As far as pessimism goes- its all about hoping for the best but being prepared for the worst.
    Blind optimism never pays.

  9. anil bansal
    Thursday, February 21, 2008 at 8:45 am

    A very pessimistic post from you while caution is advised no need to panic. The market as anticipated has moved down. may be there is more to come.
    The indian economy is poised to grow may be at a slower pace. There is no reason for the investors to panic.
    It is too late to sell equities (at a loss) and buy commodities at a peak.
    You say people aree doing it– should we follow public or should we follow smart investors (who would be doing the inverse-selling commodities and buying equities)?
    This dip should be seen as a bargain sale and to pick up some cool stocks. look at stocks with high FII holding and stocks which had qip issues a year back. These would see the fastest rise once the market recovers.
    Growth always has precedence over inflation. you will see the interest rates going southwards at an appropriate time.

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