Let us Discuss.......

A reader asked me a question and I have tried to answer it in my way....

Hi Rajeev,
As more and more negative news hitting on credit crisis, crude, politics. Can we expect any any rally in short term. In last market crash around 2001, it took 2-3 years for next bull market rally to start.This time, how can we expect rally this year itself? How is this crash different from earlier crash for recovery in such short duration.

Thanks
siva….

Let us Discuss…..
Well, credit crisis is concern.So is crude and politics.
Now we will take one by one.
Whether the credit crisis will remain there forever?
The answer is,it will not. It has to be donewith by passing of time.
Second thing is will Indian Market be affected by it or not?
Whatever damage is done is done maybe some more pain left,but it is not possible that they will keep on selling.Moreover the Oil Dollars are yet to reach Indian Shores….but they are going to come.They are just waiting on sidelines.
Now Crude.
Well, it may go higher to even $175 or 200 but speculation can’t go such longer.We have seen in Stock market.The demand in crude has rised by just 1% and will remain there for next couple of years.Means crude should come down as it is speculation.
Politics:
Well, I am reading that no one is ready to back Left on Nuclear Issue.Also heard that BJP can give support for Nuclear Deal……
The scenario is totally different from the 2001 year. At that time we were growing at just 3% GDP while even due to crude and commodities bull run we will be having GDP of atleast around 7.5 % if not more.So we are still at the double the rate of growing then in 2001 and that cannot be ignored by investors.Moreover in this period of turmoils only China and India are growing at much much higher rate then any world economy.
So to say, I think there is no reason to be bearish and think of 2001 year.
I have a discussion with one friend and he says that,

1)House Tap - The improving direct tax collection revenues of Govt of India
2)Ocean - The Huge Fiscal deficit.
3)Consider this - There is 71000 crore Loan Waiver. There is the 50000 crore (or more) Sixth Pay commission bill. There is the 95000 crore Fertilizer Subsidy. Then there is the 1 lakh crore rs plus Oil Pool Deficit funded through bonds.... all this is in one fiscal year - 2008-09....
4)Now rising inflation will mean more DA Payouts for Govt staff plus higher interest rates which means that Govt liabilities aka debt becomes costlier to service.
5)PC has been an expert in hiding the government liabilities through peculiar illiquid bonds hoisted on the PSUs and Fertilizer cos and these bonds are sold at a loss to institutions like LIC. This is nothing but Enronomics. All this is only going to increase money supply and reduce the value of money and any inflation has to be discounted through lower market valuations - espically for companies (like in realty sector) that are rate sensitives.

These were his concerns for bad market and Bear market….

I told him that if these are your concerns then we cannot see a Bull Market for years together, because the concerns you have shown are not going to go within a year or two but is going to remain for years together and hence I see no chance for a Bull market for years together.
And if he thinks that Bull market can again take place in a year or two( I write this because he is always bearish) then we should not talk of this concerns.
So the bottomline here is , the concerns and negative remains where it is and if market has to run it will run and no one on earth can stop from running.
It depends how your mind is.How you think.Positively or Negatively.
Remember that , Bear market are investors friends as he gets cheap……what he wants….as can be seen on horizen of Indian Market.No one knows the bottom.

There is another incident.One friend told me that Ashiana Housing has gone down from Rs 215 to Rs 70 and that is a loss of 70%.He use to buy stocks looking at growth, Management, earnings, Debit ratio and everything.He is holding that stock , maybe not…but I wrote him that in Bear market everything goes down.Hence there is nothing like good or Bad management or nothing like seeing in debit ratio,debt Free co etc…..
Even in bad market some stocks are making new highs like JPT Sec….
There are people who always wants to buy cheap and hence always write negative.They were bearish at 6500 level , at 9000 level and even at 21000 level…..
But I always say ,
“That is why I never ask for a Bear market.....because I know what happens in Bear Market.I have seen all since I entered in Stock Market in 1985......
While Bulls take 2003 to 2008 , means 5 yrs, Bears will take only 1 yr or 18 months to bring back prices to that level...and that is too fast by any means.....
Don't invite bears......I know there are arguements that we do not invite them , the environment is such, but as our saying goes, never invite trouble , otherwise it can really come at your doorstep.....
People asking/inviting for a bear Phase to buy cheaper will also be GRIND TO DUST and will horribly repent why they asked for that.....as there is no bottom in bear market….
Bears are more ruthless then Bulls.......
We all have asked for that and now we have to face it.........majority Rules everywhere......isn't it.....
Well, I have given my view and shared my experience ……that is my view…maybe I am wrong…..

Rajeev