|»5 Minute Wrap Up by Equitymaster|
On This Day - 9 OCTOBER 2010
Why Indian stock markets could go higher...
In this issue:
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History has shown that the FIIs are a fickle lot. At the first sign of trouble in their home markets, they will reverse this flow. And share prices will dutifully reflect that. Given these facts, one would expect India's Finance Minister to be a little weary of the dollars rushing into India. But that doesn't seem to be the case. As per a leading daily, Mr. Pranab Mukherjee does not see the need to restrict foreign institutional investment. "That situation has not arisen in the Indian economy today" he says. Referring to the stock markets, he adds, "I don't think it is going to be too volatile". He believes the inflow "has not distorted market sentiment and, therefore, there is no question of putting any curbs."
Unfortunately, we are not as confident. More FII inflow will lead to stock markets going up further. At a time when we already feel stocks are rather richly valued. If and when FIIs flows change direction, it will rock the boat. We would strongly advice that you pay particular attention to valuations at this juncture while creating your portfolios.
Note: Wealth denotes the sum total of the wealth of all citizens in respective countries
Despite all the bad economic news coming out of the developed world, the fact remains that they are way ahead of the emerging nations. The chart of the day shows the wealthiest nations in terms of a share in world wealth. As expected, the US and Western European nations lead the pack. However, the rate of growth in wealth is much higher in emerging nations, especially China. Ten years ago, the dragon nation was on the seventh place on the list. Today, it occupies the third spot. By 2015, it is expected to dislodge Japan at the second spot. India's wealth has also grown fast. It has tripled over the last decade and is expected to grow another 80% by 2015. But it still pales in comparison to the dragon nation. China is nearly five times as wealthy as India.
Among the European markets, France was up 1.9% while Germany and UK were up by 1.3% and 1.2% respectively. Japan closed the week up 2% while Hong Kong was up 1.4% and Singapore was up 0.7%.
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