|»5 Minute Wrap Up by Equitymaster|
On This Day - 7 APRIL 2010
Sensex at 18,000! So what?
In this issue:
------------------ Listen to the sound of money...big money ------------------
To listen to investment strategies and insights by Ajit Dayal and Bill Bonner on the world economy, India and the biggest risk it faces, the 'must-haves' in your portfolio, ' the 5 categories of investment to build your wealth'....and so much more, click here
Doesn't this sound familiar? For those of you who are regular watchers of these channels, you must have seen such scenes repeated numerous times in the past. And this time it's no different.
The thing is that most investors give so much attention to the Sensex's movement that they end up basing their stock investment decisions on how and where the index is heading towards. So, while they cheer the Sensex's rise, they fear a correction in the index. Subsequently, they go all out into buying stocks when the Sensex is rising. And selling stocks when the Sensex is on its way down!
We believe the Sensex needs to lose its relevance for you to base your long term equity investment decisions. There have been innumerable instances in the past when gullible investors have lost loads of money just because they jumped on the TV experts' advice that the "Sensex will touch XYZ,000 in 1 or 2 months time!"
It's time you block the noise. Stop listening to the paranoid experts who claim to know exactly where the Sensex is headed! Just look at individual stocks and their intrinsic strengths and weaknesses before making the decision to invest or not to invest! Nothing else will do.
Rakesh opines that there is no doubt in his mind that the developed world is going to go through a long period of slowdown. He believes that there are far too many excesses in the developed world. And sooner or later, they would blow up. However, he has refused to give the timing of the same. In fact, he himself does not know when the blow up will occur. But he believes that it will happen for sure and there will be below normal growth in developed economies like the US. He further adds that when the slowdown happens, there will be a shift of power. Not just power but a shift of wealth and prosperity as well, from the West to the East. But this shift will be far from smooth. It will have its own problems and there could also be a lot of friction.
And who will benefit from this shift? Is it China that Rakesh is bullish on? Certainly not! Like a lot of other investor in recent times, even he is negative on China. He argues that the business model of the country is unsustainable and hence, not suitable for the long-term. Thus, it is India and Brazil that he believes will be the main beneficiaries of shift in power. Both the countries, he adds, have sustainable long-term models that would ensure years of strong growth. To sum up, he sees good future ahead with some sort of uncertainty. Not to forget the rise of India and Brazil.
He explains that bailing out countries or companies will lead to weaker currencies and their eventual collapse.
There's a good old saying that desperate times call for desperate measures. While the times may not seem to be all that bad, the measures certainly seem to be desperate. A survey done by accounting firm KPMG has reported that nearly two-thirds of the respondents believe that incidents of fraud in India have risen significantly over the last two years. Nearly 30% of the surveyed Indian companies believe that fraud in financial reporting remains the biggest concern. This is on the back of weak rules and the inability of authorities to enforce regulation. What does this imply for a retail investor? Quite simple actually! Stay away from scam-likely companies!
These investments would be made in ports, communication, roads and the like. All this is a part of the India-US Financial and Economic Partnership. This has been formed for two reasons. One is to strengthen bilateral engagement. The other is to understand the macro-economic financial sector and infrastructure related issues. The importance of infrastructure has been mentioned several times in the past by the government. Sadly, not much has been done to execute the same. We just hope that this time around things will be different!
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