Many markets across the world have been having a great run for the past 3 months. For some markets it has been a record of sorts, marching northwards week after week for the last 3 months. Investors are seeing their portfolio values looking healthy.
Unlike children who love the bear and get scared off by looking at the bull, the adult investors love the Bull and are scared off by the looks of a bear. Right now it looks like the Investors are having a quite little love affair with the Bull.
Wait a minute…may be it is not the Investors as yet…to me it looks like the Traders are having a quite little love affair.
Looking at the run, I am little worried. I do not see anything major being done by Governments. They made some moves to stop the collapse of their financial system. Since then, it is more like “talking the market up”. Be it the developed markets like US or the developing markets like India. The lawmakers and policy makers have talked about changes and fueled this unprecedented rally. Economic Data have not come out stronger to initiate such a phenomenal move in the Markets.
There is no doubt that markets over-reacted on hearing the crisis. A mild and sustained rally, correcting this imbalance, would have been justified. In my opinion, right now there are few markets, like India, which are in a over-bought situation. I think a pull back is round the corner and a must.
Being an Indian, I cannot restrain from writing about Indian Markets. There is enough premium built in the Indian Stock market on the Budget and the first 100-day action plan of the new government. The BSE Sensex is up 56% for the year. With no major change except for a re-election of the same Government, such a move can build up another bubble very soon.
Many companies are still cutting jobs. Exports are not looking good either. I think the funds pumped in by the Government into the system is yet to have its effect even after months. I am beginning to wonder if the banks are still hoarding money given by the Government.
SBI is looking for INR 10,000 Cr to step up its Tier I Capital. This clearly states that we might still have some liquidity problems in our Financial System. I would be happy if the RBI does a stress test of all the Banks and also ascertain the toxic assets owned by the Banks. RBI should also check the current NPA and expected NPA levels of the Banks in the coming quarter.
Another factor of concern for me, is the Inflation. With so much money pumped in to the system, the inflation, as of now, has not shown any sign. Does this confirm that the money is lent out on a very selective basis? With talks of another stimulus, at a time when the commodity prices are speculated to go high, the inflation should start creeping up soon. Is the RBI ready to handle inflation, if it roars up swiftly? Right now, it seems that the rally is built on lot of hopes, some realistic and some idealistic.
This rally is TOO MUCH TOO SOON. I would wait for the correction.
Disclaimer: All information and views posted by me in the blog are solely my views and opinions and do not necessarily reflect the truth or the real situation. The material and information contained on this post is provided for pleasure reading only. You are requested to consult your Financial Advisers before making any Investment related decisions. I do not recommend or suggest any investment decisions for any of the readers of this blog. I therefore do not accept liability for any loss one might incur, by taking decisions based on my posts.
Unlike children who love the bear and get scared off by looking at the bull, the adult investors love the Bull and are scared off by the looks of a bear. Right now it looks like the Investors are having a quite little love affair with the Bull.
Wait a minute…may be it is not the Investors as yet…to me it looks like the Traders are having a quite little love affair.
Looking at the run, I am little worried. I do not see anything major being done by Governments. They made some moves to stop the collapse of their financial system. Since then, it is more like “talking the market up”. Be it the developed markets like US or the developing markets like India. The lawmakers and policy makers have talked about changes and fueled this unprecedented rally. Economic Data have not come out stronger to initiate such a phenomenal move in the Markets.
There is no doubt that markets over-reacted on hearing the crisis. A mild and sustained rally, correcting this imbalance, would have been justified. In my opinion, right now there are few markets, like India, which are in a over-bought situation. I think a pull back is round the corner and a must.
Being an Indian, I cannot restrain from writing about Indian Markets. There is enough premium built in the Indian Stock market on the Budget and the first 100-day action plan of the new government. The BSE Sensex is up 56% for the year. With no major change except for a re-election of the same Government, such a move can build up another bubble very soon.
Many companies are still cutting jobs. Exports are not looking good either. I think the funds pumped in by the Government into the system is yet to have its effect even after months. I am beginning to wonder if the banks are still hoarding money given by the Government.
SBI is looking for INR 10,000 Cr to step up its Tier I Capital. This clearly states that we might still have some liquidity problems in our Financial System. I would be happy if the RBI does a stress test of all the Banks and also ascertain the toxic assets owned by the Banks. RBI should also check the current NPA and expected NPA levels of the Banks in the coming quarter.
Another factor of concern for me, is the Inflation. With so much money pumped in to the system, the inflation, as of now, has not shown any sign. Does this confirm that the money is lent out on a very selective basis? With talks of another stimulus, at a time when the commodity prices are speculated to go high, the inflation should start creeping up soon. Is the RBI ready to handle inflation, if it roars up swiftly? Right now, it seems that the rally is built on lot of hopes, some realistic and some idealistic.
This rally is TOO MUCH TOO SOON. I would wait for the correction.
Disclaimer: All information and views posted by me in the blog are solely my views and opinions and do not necessarily reflect the truth or the real situation. The material and information contained on this post is provided for pleasure reading only. You are requested to consult your Financial Advisers before making any Investment related decisions. I do not recommend or suggest any investment decisions for any of the readers of this blog. I therefore do not accept liability for any loss one might incur, by taking decisions based on my posts.
Posts
No comments:
Post a Comment