Global: Off the beaten track! - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Global: Off the beaten track!

Jan 24, 2005

The week ended January 20 saw markets round the globe moving 'off the beaten track' as market participants remained apprehensive about the course of the US economy, inflation and interest rates. The pressure was mounted as 'negative' vibes from the Fed regarding a hike in interest rates continued in this week as well. The pressure was also seen across other major indices, especially from those of the emerging nations. Leading losers this week included the Hang Seng, BSE-Sensex, Nikkei, and the Dow. Also, this week marked a straight three-week decline in the Dow.

Key global indices...
  14-Jan-05 21-Jan-05 Change
NASDAQ 2,008 2,046 1.9%
CAC 3,834 3,842 0.2%
DAX 4,212 4,220 0.2%
Hang Seng 13,573 13,544 -0.2%
BSE-Sensex 6,221 6,183 -0.6%
Nikkei 11,358 11,285 -0.6%
Dow 10,621 10,471 -1.4%

Readers should note that the minutes of the meeting of Federal Reserve (held on December 12, 2004), which were released a couple of weeks back carried some accompanying facts that led to investors across the world panicking in belief that the faster rise in the US interest rates will lead to the 'hot' Foreign Institutional Investors (FIIs) money reversing its flow, back towards the relatively safer US treasury bills and bonds. The minutes of the aforesaid meeting indicated that, apart from the indirect effects of higher energy prices, the recent depreciation of the US dollar against key currencies was also putting pressure on inflation, thus increasing risks of a faster rise in prices going forward.

These key details of the Fed meeting led market participants to believe that the US central bank might raise interest rates faster than in the past, thus increasing risks of re-allocation of FII money back to US equities in 2005. Apart from that, the fact that economic policies across the globe are now more integrated than ever before, investors seemed to have believed that in light of the US Fed raising interest rates at a faster pace, central banks across the world will follow suit, thus stalling investment and consumer spending. A hint of the same was seen this week in form of a report indicating weaker consumer sentiment.

This week, also playing spoilsport on the sentiment were factors like spiraling crude prices and weaker than expected earnings reports from some large US companies like eBay and Citigroup. As a matter of fact, US light crude for futures have risen to above US$ 48.5 per barrel from their low of US$ 40.5 per barrel around four weeks back. Lower inventory levels in the US have resulted in this latest spike in crude futures and this has concerned investors round the globe.

What should Indian investors do?

In light of the concerns that have been mentioned above with respect to FII flows reversing their direction and concerns regarding rising crude prices, we suggest that investors should be cautious when it comes to investing in equities at the current levels. Apart from the fact that return expectations needs to be toned down, investments need to be staggered over a period of time. Happy investing!


Equitymaster requests your view! Post a comment on "Global: Off the beaten track!". Click here!

  

More Views on News

How Much Money Should an Investor Set Aside for Trading? (Fast Profits Daily)

Sep 21, 2020

In this video, I'll give you a simple equation which you can use to decide how much money you can set aside for trading.

Kotak Standard Multicap Fund: Strategizing Growth with Focused Approach (Outside View)

Sep 21, 2020

PersonalFN's analysis on the features and performance of Kotak Standard Multicap Fund.

Sensex Can Go to 25,000 Before it Goes to 60,000. Are You Prepared? (Profit Hunter)

Sep 21, 2020

Am I expecting a big crack in the Sensex and what next?

What Do the Charts Say About Buying Smallcaps Now? (Fast Profits Daily)

Sep 18, 2020

Everyone seems to be excited about buying smallcaps now...but is it the right thing to do? What do the charts tell us? Find out in this video...

Sundaram Bluechip Fund: Will Hold the Stable Horses (Outside View)

Sep 18, 2020

PersonalFn briefly outlines the newly launched NFO note HSBC Corporate Bond Fund.

More Views on News

Most Popular

How the 8-Year Cycle Can Help Identify Multibaggers (Fast Profits Daily)

Sep 11, 2020

This is how you can apply the greed and fear cycle in the market to pick stocks.

Why am I Recommending Caution? (Fast Profits Daily)

Sep 9, 2020

This is why I have changed my short-term view on the market.

This Could Be the Best September for Auto Stocks (Profit Hunter)

Sep 11, 2020

Here's why I think this month could be a great for auto stocks.

Why We Picked This Small-cap Stock for Our Hidden Treasure Subscribers (Profit Hunter)

Sep 17, 2020

This leading household brand will profit big time in a post covid world.

More

Covid-19 Proof
Multibagger Stocks

Covid19 Proof Multibaggers
Get this special report, authored by Equitymaster's top analysts now!
We will never sell or rent your email id.
Please read our Terms

S&P BSE SENSEX


Sep 21, 2020 03:35 PM

MARKET STATS