Getting a Global Perspective - Singapore

Hi friends, Sorry for not updating blog in last week as I was out of country to Singapore for attending a Wealth Summit on Asia Rising - The growth Engine for Private Banking post crisis. It was an interesting trip as I went out of India for the first time and came to actually see many things which I had only heard of. Some good things about Singapore are like very good infrastructure, good management of resources, no discrimination between man & woman, civilized society, sky-scrapers & last but not least is the humble attitude of its citizens. Summit helped me in gaining knowledge and was pleased to meet many knowledgeable people of the leading banks.

Coming back to markets, it has been a smooth consolidation happening. Coal India IPO had a stellar response from HNIs as well as FIIs. Retail response was good but not euphoric. I feel retail investors should get 20% return on listing. Many investors ask me about which sectors look attractive at 20000+ levels. At Concept we feel that domestic consumption has a long way to go along with Infrastructure which is being given thrust by GOI. We like Banks specially PSUs along with NBFCs although valuations are a bit expensive as compared to PSUs. We also like retailing sector, pharma & OMCs. We have placed our bets accordingly in our PMS which has done exceedingly well since inception.

Big sell-off according to us can come only in two cases. One is the sudden rise in crude prices as we import 70% of our requirement. Second is the sudden sell-off in global equities due to some catastrophic event happening which according to me has a remote chance. On the positive side at 19 time’s forward earnings we are reasonably valued. PE multiples can go much higher and I believe that “Mother” of all Bull Run is yet to come in India.

3 Reasons

It has been a smooth ride since my last post on the blog. Nifty is at around 6150. I maintain the view that market will hit new high. My reasons are three fold. First and foremost, I look at the macros, which is the global market. If you look at the biggest bull market or the place where maximum money is being allocated, you will find it in the US debt market, the US bonds. The kind of move that you are seeing in the US bonds and the kind of money that is moving away from equity funds globally into US bonds is telling you that most of the thinkers are still very bearish. Everyone is talking about double dip etc, so the large amount of money is moving away from equity into debt. But inspite of that, when I look at the charts of global markets, it tells me that there is a different story out there. You look at the US, the Dow, it had made this shoulder-head-shoulder kind of formation a couple of months ago, but the recent rally has almost taken it above the right shoulder. So, let us say 10,800 is breached on the Dow and if 1,150 gets breached on the S&P 500, I see that a lot of trades, especially in the hedge fund world, which have moved away from equities to bonds, a lot of people have shorted equities, will have to cover and get back into equities.

The second reason why I tend to be bullish is because if you look at Indian markets, the three sector indices i.e. the auto index, the FMCG index and the pharmaceutical index have been at lifetime high for months. Moreover, what has happened is in the last few weeks is that the bank index which is a very significant one due to its weightage in the Nifty, has got into lifetime highs as a consequence of which you can see the rapid growth in Nifty.

The third reason I see why these markets will again go further is because when you look at the street, the mood on the street, it is not quantitative, but it is a feel you get when you have been in the market. We do see pay-outs everyday, means retail investors are off-loading their portfolios. There is a BOOM phobia among investors who have burnt their fingers in 2008. History suggests that market never tops when retail investor is selling.

So I feel there is a long way to go, corrections will come & go but still the direction would be up.