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2011 – Happy New Year for Indian Investors

2011 has arrived and we are back with unsolicited advise for investors – well I always mean retail investors. The most vulnerable class of investors.

 

The myth at the dawn of 2011:

1. The recession is over

2. The probability of double dip is over.

3. US its banking system, its overall public policy and its economy is on firm track – more importantly the job market is hot.

4. Europe is out of woods regarding its mess in the banking sector and their will not be any sovereign collapses.

5. In US – Republicans and Democrats will live in harmony.

6. US acknowledges the strength of developing world.

7. IT market is ripe again

8. Commodity cycle is on an upside thanks to demand.

9. Obama will lose second term

10. Manmohan Singh government in India will collapse under weight of corruptions.

11. Ambani brothers are bete-noire.

12. Developing economies will call the shots at GATT/WTO.

13. Oil will continue its upward journey towards $140+

 

The reality at the dawn of 2011:

We are on our legs as compared to 2008-2009 but definitely not on two legs. All what is mentioned above – just think the reverse is actually true – however as always the eyes are incapacitated to see those things on what light has not fallen. It does not mean that these things do not exits – it does. Just that, it is under a thin membrane right now. All the symptoms like high inflation, unemployment, downturn in realty price, cut down of IT and similar spends, global cost cutting, thinning of commodity prices (except Oil), struggle in the US banking sector, compounding problems in EU related to health of bank and sovereign issues.

 

What should an investor do?

Investors had a decent run in 2010, and the dawn of 2011, promises a lot. However, on the conservative side, we recommend investors not to get carried away by the pep talks and wait for concrete results to happen. Concrete results do not just mean good quarterly numbers. It’s a collective good will which we refer over here. Speaking in an Indian context, we would like to see the inflation coming down a bit, moderate fiscal imbalance, atleast a 7.5% GDP growth, a governement which is free of the corruption mess wherein it currently finds itself, a Prime Minister who has its own rather than being compelled by the compulsion of coalition drama and an overall growth track led by construction of infrastructure and state of art knowledge facilities. Now everything becoming a reality in 2011, will be a utopia, but as long as we see that we are on track leading towards these solid foundations – we have hope. This is the hope, investors, investing in India has and as always irrespective of any short term pitfalls, equity as an investment class will beat all other class over time and that too by a wide margins. So investors, should stay invested atleast 50% of the liquid portfolio they otherwise would have not cared being idling in current/saving bank deposits.

 

Advise for investors.

Markets are currently trading at 5700 Nifty levels which gives it’s a fair P/E valuations. Market will have its turbulence but we expect it to scale towards 7000, not exactly touching it during the course of the year. As always, we would not time the market that it will reach 6500+ levels on a particular month or quarter – however through this post would just want to re-iterate that anybody who is in today with 50% of its planned investment amount in market will eventually make profit (decent profit) sometime during the course of this year. The remaining 50% investments can be made if market dips for any other reasons whatsover like a bad budget, an imminent threat to government stability, or macroeconomic dynamics in terms of noise from global players.

 

Have a rewarding investment year folks and wish all the readers a happy new year

Comments

Comment from Shankar
Time March 1, 2011 at 4:35 pm

Thanks for this thought proviking post. I like your list of myths. So often, what we take as given is shown wrong within months if not a few quarters. Consensus is not the future…that’s for sure.

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