Equity markets------

Bull run a black swan kind of event (never seen just heard) in my professional life has been a very big decision maker for choosing a financial industry apart from love for the investment complexity. It has since then pinched me as “Where am I?”. It has been very tricky for me as I have just been calling 15 to 20% rallies in the markets as Bull rallies (Irony of my life).  Every Diwali I hear from Rakesh Jhunjhunwala it’s a bull run and then a 5 - 10% rally makes me feel- that’s the bull (cat) run. So in short, Bull run is just a fictitious event till date for me. Overall last 5 years have taught & shown all those events that make markets bad!!! Good way to learn (or lose).

Anyways, after having a tremendous negative view, suddenly yesterday I built pretty positive positions in portfolio. Things started looking great, after a while better and then the fear lurked what if I read it wrong.  Fundamentally mostly finalized target of 5200 on nifty got revised and now 5450 seems to be the base.

Gigantic current account deficit of 6.7% predominantly because of gold and crude imports, slowing GDP at 4.5%, IIP numbers negative to marginally positive and political drama, no change in these situations in the markets made me give negative presentations to all my investors till last week. Gold crack made me very happy as it happened as I wanted and would love to see it at 22,500, won’t happen one way but that’s the way it should be. Gold negative, equity negative, real estate extremely negative made me think last Sunday where should one invest and it seemed end of the world to me. Couldn’t think of anything positive.

And then the Global commodities sell off and gold nearly after testing lot of patience cracked, Brent crude suddenly below $ 100. All the factors that made my view are turning out to be positive. I wont get into hassles of divulging too many numbers to confuse you, but the crude basket for India suddenly starts looking great i.e., below $ 100 and surprise surprise inflation is below 6%. That’s a killer combo.

Inflation below 6%, crude expected to go much lower, gold cracking - all will make current account deficit number better, this in turn strengthen rupee. Inflation will fall or at least the numbers will be lower on larger base effect. This should actually propel RBI to reduce rates with conviction (this time at least after so many forced reductions). Bond market is already celebrating the rally and cut is getting factored in. Any rate cut above 50 bps will be a huge sentiment booster and certainly indicate the bottoming out and revival of investment cycle. GDP numbers on the back of lower GDP last quarter should actually be much higher. Infrastructure, capital goods and many midcaps start looking much better and as usual market will rally ahead of times.

All seems to be set for a good breakout and rally. First banks & rate sensitives in anticipation of rate cut and then the rest in the hope of revival should run away. My personal view 6000 should be much easier to attain. I may go wrong but the situation seems much much better for sure.

But , but and but there is also a cautious stand. You are on the verge of global sell off, i don’t know that, but if crude falls to $ 80 from hereon we are certainly going to witness the global sell off and India wouldn’t be an exception and it will fall. India in the past has fallen with crude although the fall is actually a good omen.  But I would lap up Indian markets as much as I can if that happens. Indian markets falling with its own fundamental issues no reason to buy, Indian markets falling because of global issues is just a sentimental issue and nothing like it is  a better opportunity.

Indian markets valuations with the fundamental issues getting fixed now are looking attractive. Valuations are of no use if fundamental problems persist, they only make sense when the things are actually right. Nobody is buying Kingfisher because of valuations although its damn cheap, its only when you see the problems getting fixed. Mind you, there is no policy change, political risk still is a concern. Against all odds I choose to become positive finally in short term ( 3 to 4 months). At all time peak probably we again see massive sell off from retailers who regain finally their capital after 5 years and may choose to move out.

 One big problem is real estate for me. I feel its time bomb ticking. These 20 – 80 schemes are just the “screw you” schemes. But, I don’t feel its an immediate concern. Another big concern is the global flood of liquidity which is actually an artificial one. The day it stops the western world realizes their own worth and that will be catastrophic. its actually very strange to close on negative note while I am actually positive for equity markets right now.

All above assumptions are just with expectation that the crude and commodity sell off. I hope finally it pays off…. Equities, Please please please show me a bulllllll runnnnnnn…….