The STATE OF THE MARKETS POST SATYAM
The pain in US continues with the death of marquee investment banks.Who would have thought a few months back Meryll Lynch,Lehman Brothers would no longer be in the World financial landscape.However the world moves on.The players have got fewer and the only question one is forced to ask is whether they will learn from past mistakes.History says they will not.So in future also bubbles will get created whatever be the regulations and will get burst.That is the nature of law.Human Greed will always rear its head every few years. Human fear will also happen after every bubble is burst.
This is the question that is uppermost in most investors mind.While the macros are still unclear there are clear indications that the US Macros are getting worse by the day.The drop in Oil prices is a clear indication that the growth is slackening in the largest consumer market.While the drop in Crude Oil prices is good for economies like India how the slowdown in the developed markets will affect the emerging markets is still unclear.I think the India growth story will re-emerge in the second half of the next calender year as Commodities cool off taking pressure of Inflation and thereby bringing the interest rates down in India.Also coming off a low base of growth in the financial year 2008-09 the second half of 2009-10 will definetly be better for Indian corporates.
Equity as an asset class has taken quite a beating over the past 2 quarters.FII's have withdrawn over $5 billion USD over the last six months and the selling has not abated.So the question is whether India will see its first net withdrawal in the calender year 2008 after the FII investments were opened up over 15 years ago.There have been various theories floating around saying that India is the most expensive market among the emerging market economies. The point that needs to be understood is that after the first phase of the bull market starting 2003 India has been basically a bottom up market rather than a top down market. Among the 6000 odd companies that are listed in our exchanges there are hundreds of companies which are being traded around 10 times their current year earnings with clear visibility for earnings for the next 2-3 years and a growth rate of over 25%.
The Stock markets across the world has been seeing turmoil over the past few weeks and the Indian Markets have shaved off 30% from the peaks it reached in Jan 08. The damage has been worse in the broader markets where individual stocks have seen erosion in market caps to the extent of 50% or more.The question in everybody's mind is where do we do from here?What should the long term investors do?
Post the listing of Teledata informatics the prices have come down to Rs.20.The listing of the other two companies will happen in the next 10-15 days. The interim dividend for all the three companies will be announced in the first week of April 2008. I Still reiterate that the combined entity will give good returns for the investors.
Subsequent to the sharp dip in the stock markets it is strongly recommended to buy the following shares from a long term perspective:
This stock has been discussed threadbare in various message boards in the past.The recommendation to buy comes from basically the following pointers: