Friday, January 09, 2009

The STATE OF THE MARKETS POST SATYAM

Mr.Raju came out on Wednesday and shocked the corporate world with his admissions.I still remember the day couple of quarters ago when Satyam had come out with the results which was supposed to be very good and the markets reacted negatively on the stock.When asked by the media about the market reaction to the results Mr.Raju was very upset with the market.so why was he upset?The market in its wisdom was battering a stock for reasons well know to it.

There is no way every single investor would be able to go personally to the company he has invested to verify the accounts.They believe in the management and the auditors to their job with a degree of sincerity.

Does it surprise investors that two corporate scams have happened in the last few years-Global Trust bank and Satyam-both out of Hyderabad.So what is it with Hyderabad and Corporate scams?Nothing special except the greed to outdo the market and the brethren in Delhi and Mumbai.Most of the entrepreuners coming out of these regions are first generation entrepreuners who want to make it big in the corporate world-bigger and faster-no time to waste.So another big name in Corporate India goes into the dustbin.

State of the market:

So the turmoil continues.The real economy is taking a beating.Confidence is down.People have lost jobs,lost money in the markets but the bills remain to be paid at the begining of every month.

My take is the real economy would slowly start recovering from the begining of the first quarter of next year(Financial year) and it would take more than 2 years (if we are lucky with the global situation) to get anywhere near the 8-9% GDP growth rates.If the proposed Obama package starts really working from the second quarter of the calender year(remember the US package will (if) start showing effect earlier since it contains income tax cuts etc which will put more money in the hands of the US citizens faster then the stock markets should start recovering six months earlier.

I dont buy the theory of Shankar sharmas of the world that India's bulls market cannot happen in isolation.Since he was right about the markets in 2008 doesnt mean he would be right all the time.If that was the case he would be 'GOD'.

The markets may make a new low in Jan-Feb,but the possibility is only 50%.If you go buy the theory that markets discount the future and not the past then the bad results are already factored in the market.The results of Axis bank which came out today had some interesting features.The NPA figures have not shot up up.So the corporate are not in that bad a shape as it seems.I also think in this downturn the corporates have taken quick steps to reduce the running costs to limit the damage of the slowdown.Factories have been closed wherever possible to limit the loss.

If the Nifty were to slide down to 1800-2000 one should start buying the nifty futures with a medium term horizon.The simple logic here is that every bull markets will have its own favourites so identifying one will become very difficult.Still my guess is that capital goods will be a big winner.




8 Comments:

At 3:22 PM, Anonymous Open letter to Bama, solutions said...

Hi Shri,

I would like to take this thought on markets to a larger canvas, the Satyam episode is only the tip of the iceberg, these scams and irregularities are the normal indicators of the crashes that follow unnatural and radical booms of markets. The organized and visionary corporates normally survive such crashes and then simply shed off their excesses or "benches" in IT parlance to the new benchmarks of reality.

The fears that are more 'real' and larger are the steps that Obama will take to revitalize and balance his economy. In an open letter to Obama, I have suggested what would to me seem like the most obvious solutions which are lying under the american social carpet. Please read and comment on that letter at http://ideas27.blogspot.com

Love Baronia.

 
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