You can definitely expect these in 2010 - The 5 Minute WrapUp by Equitymaster
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You can definitely expect these in 2010

Dec 31, 2009

In this issue:
» 2010 to witness 18 public sector IPOs
» Sensex post the highest annual gain in 18 years
» Emerging markets still have a upside says Mobius
» A country on the verge of default
» ...and more!!

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Predictions are tricky business. But this is a prediction that is almost sure to come true. We are going to see a rush of public sector initial public offerings (IPOs) next year. As many as 18 public sector companies are expected to debut on the bourses in 2010. In fact, the government does not want a gap of more than three weeks between any two IPOs. 2010 will kick off with IPOs and follow-on offerings of NTPC, NMDC, Satluj Jal Vidyut Nigam and Rural Electrification Corporation.

The reason for the rush to the primary market is not hard to understand. The government needs money. For its social sector programmes and to bring down the burgeoning fiscal deficit. Given the liquidity in the system and the RBI not showing any signs of tightening it, we believe the stage is set for the government to access it through the stock markets.

Another interesting set of IPOs will emerge from the life insurance sector. At least a few of the 23 players in the industry are likely to access the markets after the regulator has halved the pre condition of 10 years of business to 5.

Interestingly, a key challenge for both the PSU and Insurance IPOs will be disclosure of information and governance issues. As and when they come, we will be looking at them on a case by case basis, especially with regard to valuations. We do believe a greater variety of listed companies provides greater depth to the markets and more choice to investors. As such, we look forward to the issues.

 Chart of the day
In the decade gone by, many asset classes hogged the headlines - be it power, real estate or commodities. But in terms of sheer impact, few could match the rally that crude oil prices went through on their way up to US$ 147 per barrel in July, 2008. Predictions were made of even higher prices, which were proven incorrect. When prices crashed many said, they won't recover. Wrong again. As the chart of the day shows, on the whole crude oil prices have marched upwards through the decade. The key reason being the incremental demand from China and India. Over the long term, and the next decade qualifies as long term, we believe that crude prices will trend upwards. The average Chinese and Indian is only beginning to ramp up his energy usage. And we have not had a giant oilfield discovery globally in several years. The short term blips apart, oil prices will head in only one direction - upwards.

Note: West Texas Intermediate spot prices
Source: Energy Information Administration, US Department of Energy

Emerging markets continue to have potential for upside. But not without substantial corrections along the way. These corrections could be even as much as 20%. As we look towards a new year, this is how Mark Mobius, chairman of Franklin Templeton Investments, chose to summarise his views about emerging market stocks. That said, the overall global optimism for the Indian market is quite evident. In a survey by The Association of Investment Companies, 35% of money managers chose emerging markets as the region that will perform best next year, making them the No. 1 choice. But if you plan to be a net buyer of stocks in the coming year, this might not be such a good thing for you after all. As a wise man once said, it is optimism that is the enemy of the rational buyer.

What is the biggest risk that the global economy faces in 2010? Nine out of ten experts would say a sovereign default. And rightly so. After all, with countries piling on so much public debt, the risk that one of them would default is indeed on the higher side. Because of the structural imbalances that exist in the region, one of the EU countries would certainly be amongst the top contenders. Already, a huge shadow of doubt has been cast on Greece's interest servicing abilities. The country was downgraded by ratings agencies recently.

Other laggards in the EU are not in the best of health either. And time seems to be fast running out. EU heavyweights like Germany, France and other Northern European countries are showing signs of economic improvement. Thus, if the trend persists, the European Central Bank (ECB) may even think of raising interest rates. However, this may work to the enormous disadvantage of the fringe players like Greece who may want to continue with the stimulus a little longer. Thus, what happens once ECB starts raising rates would be one of the key events to look out for in the New Year. Needless to say, if any of these economies come under strain, the global financial system might also come under strain. Especially given how integrated it has become in recent years.

Troubles for financial institutions in the US do not seem to be over yet. While talks of a recovery abound, the US government is injecting another US$ 3.8 bn into GMAC Financial Services to help cover mortgage losses. This bailout makes the US government the majority owner of this auto and home finance company which is one of the largest in the US. GMAC has been saddled with mortgage assets which account for about a third of the company's US$ 178 bn balance sheet and this is expected to be a major deterrent to its profitability. This development is a grim reminder of the fact that the effects of the subprime crisis are far from over. Many of the biggies had been bailed out last year while some of them chose to repay this government money as their performance improved slightly. But the GMAC development could still mean that there are some skeletons in the closet.

According to China's foreign exchange regulator, while the dollar will continue to remain the country's main reserve currency, the country is looking to diversify its reserve currency holdings to spread out risk. It is obvious that China which holds the world's largest currency reserves is worried. The cause is the eroding worth of the greenback due the country's ballooning debt. This is the reason why the country which holds the largest amount of dollars outside the US is cautiously moving to other currencies. Another thumbs down to the confidence in the US economy.

Indian markets traded today, the last day of 2009, on a strong note. The BSE-Sensex was trading with gains of around 180 points (1%) at the time of writing. Mid and small-cap stocks were also trading in the positive. With today's performance, the Sensex will be closing 2009 with its biggest annual gain in 18 years. If you are wondering how long that is, most of the young investors and analysts of today were just into primary school then! Now that's a pretty long time!

All in all, 2009 has been a truly exciting for Indian investors . From the depths of fear in March, sentiment moved to the heights of optimism. Now as we move into a new year, caution (though with a tinge of hope) is the buzzword.

As you assess your portfolio's performance during the past year and also some lessons that the year must have taught you, we hope 2010 brings you a lot of good times to buy quality stocks to help build the portfolio of a lifetime.

 Today's investing mantra
"In a difficult business, no sooner is one problem solved than another surfaces - never is there just one cockroach in the kitchen." - Warren Buffett

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19 Responses to "You can definitely expect these in 2010"


Jan 2, 2010



Abhijeet Singh

Jan 2, 2010

Hi, 5 min wrap up team...

First of all, wish you a very happy new year.Its not just this issue but all the issues I have been reading, provided good insight truly in 5 min.

I wish you great success in future.
Best Regards


Prem Singh Dhankar

Jan 1, 2010

"PAST IS HISTORY & FUTURE IS MYSTERY" so donot think get layed by false indications- remember january 2009? be cautiousif 22000 is the possibility 11000 could become reality! Capt. P.S POSWAL should take whatever gains he is getting, then restart the game again- never put your gains - back to risk. Well, thanks for all the views.



Jan 1, 2010



capt. p.s poswal

Jan 1, 2010

thanks.......i have dropeed idea to redeem my mutual funs and rather will be more furious in investing in coming 3 months....keep it up


Ashok Roy

Jan 1, 2010

Indianmarket willgrow beyond the experts imagination. Investors have gained good knowledge of the healthy performance of midcaps / smallcaps as well. Sensex will cross 22000 by the end of 2010. HAPPY NEW YEAR.



Jan 1, 2010

Ever thought that in future the metal gold and 'Black - Gold' will have nay co-relation. Very soon both will be in short supply.



Jan 1, 2010

The well-reasoned and well-meant reports that find place in Equitymaster have been of great guidance value to the multitude of investors in stocks,who read them regularly. Your efforts are laudable. The investors look for a lot more from you in the new year 2010 and in the years to follow.


Kapil Kulkarni

Dec 31, 2009

Excellent article. Individuals has to keep themselves updated if he/she wishes to remain invested in the market for a longterm. The latest updates given by Equity Master helps a layman to know where to invest, how to invest and when to invest. I wish all the best to all investors for the coming year 2010.
Invest wisely and earn wildly.



Dec 31, 2009

very good and informative.
kindly post your views on unit linked life insurance polices.
thanks and i wish all the readers a very happy new year!

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