The highly uncertain external environment and risk aversion amongst global fund managers may keep Indian markets volatile for next few months.
We knew it for long that sub-prime loss will be booked on P&L, US economy was slowing down, food inflation is rising, European growth slowing down a tad, higher inflation is forcing central bankers in most growing economies to tighten monetary policy stance and valuations are unsustainably high in some emerging markets. Ameicans and FIIs just waited too long to accept this.
Since FIIs are now back to value investing instead of chasing dreams, the markets may not run away but these are certainly not “weak”. Consolidation at the present or a little lower level would strengthen the market for the medium term.
The stress test on Indian economic fundamentals suggests that if the US were to go into a profound recession and the world does follow her in the deep pit, India may still grow 6.5%, a decent number as compared to 4% growth seen in previous global shocks of FY98 and FY01.
About 36% of the contributors to Sensex EPS would be hurt by a global slow-down so you are required to take the following actions, take a business perspective and Market cycle approach may not be profitable. Look at strengths not apprehensions, strong visible growth.
With a $10 billion FREE PACKAGE [rumored to be in the offing] to Agriculture sector from the Union Government, don’t expect too much. The zenith of 21,206 maybe behind us.