Happy Days Are Here Again??

It’s been long since I have analyzed the market and come up with a strategy to formulate the investment plans. Until now I was quite bullish on the stock market and although with the global cues still gloomy I am not going to degrade my decision to a selling mode. I am quite certain that it will be the first quarter of 2010 which would start bringing prosperity and when I say prosperity then it will be in the same lines of what we had in last five years. I am quite certain that the world market has actually discounted most of the bad news in advance and their outlook is quite clear from the next fiscal year which is bullish.

Year 2009 will going to be remembered as a year of M&A (Mergers & Acquisition). We will see some expected and some very unexpected deals going through in almost all the sectors which are going to symbolize the organic growth starting by that time. Right now the balance sheet for each company has been well drafted and their profits and losses have been calculated and what ever decision they are going to make would be based on their margin for next 2-3 years. They will only go for an acquisition or they would only agree for a merger if they are certain that they can’t weather the coming storms in future alone. The most important point to remember is in this free fall of last one and half year the companies who would withstand the storm are only going to be the future, it doesn’t matter if their balance sheets are in red now but if they can sustain for next one year they only have good times ahead. Worth mentioning sectors are IT, metal and banking. FMCG was, is and will always going to be the only sector that can weather any storm and it has proven it’s metal anytime put against the odd.

The biggest curiosity is in the job market where the bad news isn’t stopping and according to my understanding things are only going to worsen going forward from here. Problem lies in the way recruitment has been done in last five years. Most of the non deserving candidate have candid their charms then and were enjoying their upward incline but one must understand that in long run only those who are specialists in the sector can sustain. This is going to be most true for the IT sector, with no offence to the professionals who are working in this sector, I see that there is a leap of difference between the one who have been brought from other backgrounds to this environment to the veterans in the technology. I may be completely wrong but there can’t be any choice when a company is axing people. The HRs would take no time in drawing line between people based on their background, be sure to start seeing this by mid this year. The brightest future ahead lies in the banking and financial services sector, banking being the most prosperous. Please note that what we are currenly seeing in world market "the relief rally" is not something which is going to last for long. I am expecting markets to make fresh lows in next few weeks (read that as the closing of financial year). The problem lies in the market to market (MTM) losses, with dollar value not being steady and every company downgrading it's guidelines it's not possible to sustain for small comapnies (Especially Indian IT companies) in this slowdown, outlook for the Indian IT companies is down. With their struggle to hold on to the exisiting clients with the massive human resouces they posses, they need to cut their workforce in order to survive in this environment. They operate on the minimal expenses and the only way to cut the cost is clearing the excess headcount.

Talking about the share market, well we can’t see it more than 11K by the end of this year. People are sitting with a portfolio down 80-90% and due to the same reason when ever there is a relief rally they would like to book their losses and exit the market by doing so they will unwillingly pull the market down and the same cycle will repeat for next few quaters. I expect that the general election in next few months will decide the move of market. Although I don’t favor any political parties personally but I wish to see the same UPA government to come in power since it would ensure that the reforms and financial moves to counter the crisis around would not change a drastic shape. This time I urge voters to vote for the growth for next few years not for any long term plans. Under any circumstances I don’t think I can predict any market move post elections so I would not make any comment on market in next few months. Let’s hope that the Indian public will understand the power of their votes and vote for countries organic growth in these difficult times as virtually no growth can be seen in next 2-3 years for the countries outlook. By then I can only think of investing in MFs, metals (Gold, silver).


Talking about US, I don’t think I can see any recovery there in next 2-3 years so expecting happy news from their side is too much for asking. We need to find alternatives source for a spike or surge in world market. I am certain that in next one year apart from US and Europe all the markets will be off the recovery mode and would start galloping in next 2 years. No market is good for long term until there is a source for liquidity and that is not seen at this time but markets would definitely find it, understandably and quite vigilantly we can see that metal is the next big thing. Gold specially and surely it will contribute in the next fall cycle for the world economy, according to my analysis of what's going to be the outlook for next few years, it is most certain that this eye opening recession has thaught US a great deal and with Obama really pressing hard to add value to US as a country we will surely see outsourcing getting shrunk to a ligitimate level which would definetely impact the emerging markets like India, Brazil and China to mention a few. What is not very clear though at this moment is how will US curb all the losses incurred while the reform of it's sick economy. One of the biggest asset that US has is it's arsenal. Although the F series of fighter planes are not in for selling but I won't be much surprized if they put them on sell and one of the biggest exported would be India for sure. US economy require the same medicine which India got in the early 90's thanks to P.V. Narsimha Rao and Man Mohan Singh, more than anything US require a better regulation and sanity system. I was a great believer in the credit score system there but after this great fall my faith on credit score has been crashed, relying on credit score only would not help them facing the challages they currently have. They need a better regulator which may require them to restructure the financial system. It's must for them reason being the rest of world will move fast and they will not be able to catch them later. I don't think I would like to change my outlook for US for next year, it's been downgraded and should remain the same. Expect some more down fall there but surprizingly I see a spark in the IT sector there; biggies like IBM, Microsoft, Dell and Oracle are on their way for M&A and they will enjoy position over those comanies who have drown neck deep due to the economic slowdown an they will surely going to butcher them given a single opportunity. I am waiting for more and more M&A news in next few months. I strongly believe that within next 6 months i.e. by September we should see world along with US getting in a small recovery mode, I hope and wish that it will not be a false relief rally then.