How much will you read with last week’s global market correction India Joining the Rebound?
It’s better than I expected. Despite the volume being low, the breadth and participation is good and we are at the low end where people may have to start short covering. If they do, it could move the market around 8-10% and up. I don’t know exactly how long the rally can go on. It may end tomorrow, it may go on in July. i think it’s one bear market rally And with the exception of companies that are either beneficiary of inflation or hedge against inflation, they will be selling it.
Even in our previous conversations, you have always made a very interesting point that higher oil prices does not mean that it will take India down. The problem is that while agricultural inflation has moderated, crude oil prices have remained around $120 a barrel. Do you think there could really be a connection between the Indian equity market and crude oil?
Really at $120 a barrel, it’s tough but I would say the pain point that used to be around $70 or $80 is definitely too high and well, I can’t say, but $120 is an issue Despite the fact that pump prices are subsidized. Some or other aspects of inflation, including food, have a trickle through to higher energy prices because you need energy to make and distribute food; But it is not the only one.
So $120 a barrel is an issue but it is an issue for every other country in the world except a handful of commodity beneficiaries like Australia, Canada, South Africa, Indonesia.
It will be great news for global equity markets if there is no recession in the US, but it is a big week for India. Our central bank will meet to discuss rates. May has been brutal for Indian stock markets, but sell-off momentum FII has come down. What do you make of that?
The biggest reason is that this is an emerging equity market and they are considered risky and when the S&P itself is down about 13% or 14% so far this year, it is really hard for anything to get up. you is not the one. Direct benefit of inflation but I also want to add that with China reopening there is a chance that it may start attracting some foreign capital. A lot of people will say oh, I can’t invest in China anymore because geopolitics is, but I strongly suspect that if it goes up, 10% will change their minds.
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Is this a footnote to a caveat that prepares itself for more heavy selling by FIIs in the coming weeks and months?
No, actually I am looking for this rally to continue and hence India will be included on that basis but I just want to say don’t get bogged down because I don’t think we are in the beginning of a new bull market Huh.
The other big concern here in India is that we have suddenly seen a spike in local Covid cases and are wondering whether to stay away from the whole hotel, hospitality, aviation type of pockets at this point and maybe a little more towards pathology Must be oblique. Or hospital stocks?
However, there has been an increase in other countries as well and it has not really changed the mobility pattern. The mobility pattern probably won’t change until there are lockdowns which you know better than me but I doubt they are going to do so in India. Obviously if there’s a big covid resurgence, some people will change their mind, but I think the vast majority of people probably already have covid and have been vaccinated and they just want to get things done. So, I don’t think it will be a big hurdle for the economy.
When it comes to India, what else are you looking for, anything new that attracts or catches your eye after the recent revamp?
To be honest, I’m not watching the market closely to see what kind of thing you’d like me to answer. It would be better if I left this question. I am apologetic.
Given all this and given that we are talking about a week where we may see rate hikes including in India, there is also expected to be a number of important meetings in the EU, when you are looking to stay in investments. What are you telling customers when it comes to Equity Market? An analysis suggests that there is more liquidity in GFC than what we have seen and cash holdings are at post-9/11 levels?
Let me give you an interesting statistic. If you had $100,000 today and we have inflation running at 7% per year, then in 10 years’ time, it would be worth $63,000. Hence, cash is not a very good viable long term option. We should be invested in real property or proxy for real assets and those are things that anyone can touch with their two hands like commodities, real estate, proxy for them or companies that make them.
Some of them are listed on the exchange and that is where the investment is to be made, not entirely but certainly there is a healthy risk involved. We chose Canada as our main route to do this but there are many more places in the world. You can do the same.
Where are you when it comes to this whole debate about growth stocks vs value stocks? Do you think tech stocks, new age companies are going to make a comeback?
Right now, we are not in the same market we were in a year ago or two years ago. The great bull market that lasted from the end of the global financial crisis to November-December last year is over and we don’t really know what lies ahead of us. finally cyclic bear market will end and a new up cycle will begin but I don’t think anyone really knows what the leaders will be.
I don’t think big technology stocks will be leaders simply because they’re so big and it’s hard to grow when you’re already that size. They can perform perfectly well in line with the market. They will not be leaders. I would say that one area that we have identified as a potential leader is the pharmaceutical sector where the major cost component for those companies is research and development, not raw materials.
They have some raw material prices that are rising but that’s not going to depress their margins much and we’ve seen that after five years of poor performance, pharmaceutical companies are now outperforming the broader market in the United States and Europe. have been