Current Indian Stock Market Scenario vs US Recession.

Indian Stock Market including both NSE-National Stock Exchange and the BSE-Bombay Stock Exchange have certainly taken a tremendous beating in the past few weeks. We are sure most of us here knew that the correction in the trading curve was round the corner which would be healthy, and the markets would bounce back from 18k levels with the help of mutual fund investments & buying of Indian stocks again. However the anticipation went wrong, and the US recession story along with global and Indian commodity prices have added fuel to the global equity market turmoil on a whole.

Do we have to worry our Indian investments in stocks & mutual funds?

What would happen next in the stock markets of India?

Whether investors should make more investments in India?


Well we have to realize a fact that we all are NO astrologers here, rather we are investors taking calculated risks, and we should take into account the probability of us being wrong as well. Things have gone certainly worse in the Indian trading context, but we at hope that in the coming months the same wouldn’t be the case.


We at would like to bring a couple of things into picture:

1. Federal Reserve (US head banking institution, like RBI in India) is looking forward to make more rate cuts (interest rate cuts) in the coming future to ease out the credit crunch that has evoked since this subprime crisis. Its effect would take 6-8 months to reflect in the global economies including markets of India:
Derivatives Trading Market, Futures Trading Market, and Commodities Trading Market of India. This reflection in trading and investment sentiment could take some time to happen, but it would be definitely witnessed with an increment in local business, FII investment in India and NRI Investment Services in India. Good news

2. Indian Shares/Stocks market are not performing great in the gone weeks, but institutions still have abundant money on the table to invest; but with the coming rate cuts, the debt market would not look any good to them either (in the US).

So would they put money into commodities (mainly: gold, oil, silver)?

Commodity prices have risen up real fast, not giving many investors the room or time to switch from equities or debt market into commodities market. All this brings the investors, institutions, banks & hedge funds in the land of uncertainty. They have to rethink their strategy and that is where the emerging markets look attractive to these investors (because these investors would still want to invest their money. US recession doesn’t mean people would stop investing for their future, or hedge funds/banks would stop investing/speculating money). Thus bringing such investors to look for good valuations and a very positive side for the Asian stock markets. Good news

3. Nothing bad is happening in the Asian markets. We look pretty strong, and all this major blood is on the street is a result of short-term panic we are witnessing. The momentum would soon pick up once the US recession worries ease a little with fed pumping in more money (bailout) into the subprime cycle. Thus we would see lot more buy orders coming into demat accounts to buy the Indian stocks. Good news

4. India story has not changed at all. We still believe that our economy has lot of potential with great fuel to shoot up. However we still believe that this is not going to happen in short-term, and we might not see too much purchase orders coming into the Online Dmat Accounts of Indians as well as NRI, PIO or OCIs (non resident Indians). There is a lot of room for expansion in India, and there is huge demand for credit consumption. We are just waiting for the liquidity to pour-in. That liquidity is definitely on the table, but all big institutions are looking for some good indicators, and when this happens we would be crawling back on the curve. Good news

5. We all believe that the markets are majorly falling due to the US worries that are coming in and not because of the performances exhibited by the Indian corporates. Earning results of the company are expected to be out in April (when companies declare their quarterly/annual performances to the public). Everyone out here expects these numbers to be good, which could thus decide the turn of the market sentiments. Good News

Important: Our idea is not to put a very rosy picture in front of you, but to ease out some tension by highlighting certain macro & micro economic points that are still in our favour. We know investors not only with us, but also with other brokers are loosing their portfolio strength in terms of capital and valuations. However, keeping all the above notes in mind along with strong/stable Indian fundamentals that are still pretty attractive we advise our clients to stay strong and very importantly increase their time frame from 2 years to a minimum of 3-4 years now. This is especially for clients who have invested heavily in mutual funds, as mutual funds are supposed to be long term financial instruments and not short-term trading products. To conclude we would advise clients to stay calm and hold onto the positions with a long term perspective (3-4 years now) and lets take this opportunity to build our portfolios even stronger by adding good positions(especially in mining, commodity, energy & infrastructure sectors) at lowers prices as well.

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