Wednesday, February 3, 2010

Investors and analysts miss the big picture by focusing on the negative.......

Investors and analysts miss the big picture by focusing on the negative

It's said that the power of positive thinking is the most potent weapon that humans are blessed with. But Dalal Street is unwilling to think positive, despite it being the repository of market wisdom. Short-term turbulence is blinding its rosy outlook. The people on Dalal Street are unwilling to give up their myopic vision, focusing on the negative developments, even if they come in the form of mere political statements. You have just to look at market behaviour, following comments by the US President Barack Obama in his state of the union address that tough laws would be brought in taking away tax breaks given to companies, which outsourced jobs abroad. Instead, tax incentives would be given to those who create jobs in America. IT stocks saw heavy selling in India following these comments and some analysts even talked about the possibility of the sector getting downgraded, if Obama's statement turns into legislation. Those who have got jitters about the future of Indian IT firms should look at history. Any political leader, whose country is going through a recession, is prone to make such a statement. Appearing to be safeguarding the interests of local industry comes easily to politicians. Yet, such rhetoric is unlikely to result in actual impact. Even if such a law were to become a reality, it would hardly affect business between the two nations. Most large, and many mid-sized IT companies, have already opened development centres in countries from where they are getting most of their business. They had anticipated protectionist policies long before these had emerged on the political landscape, taking steps to ensure that any move by the government would not become a hurdle to their growth. What most analysts overlooked is the fact that Obama is the first US President to consistently see India as a potential threat to the economic supremacy of the US. He made India a campaign issue in the presidential run-up and now in his first state of the union address, the US President has mentioned that countries like Germany, China and India are working hard to move up the ladder and pose a challenge to the US. Realistically speaking, it will take a few decades for India to challenge the US in terms of economic prosperity. But Obama's mention of India is a clear hint that the US administration believes the country will emerge as an economic power in the near future.

The administration has noted the strong growth path that India had been moving on in the last seven years, and projected it forward, realising that the country had the inherent strength to be a strong power. India may be the only country with strong domestic economic activity as well as rising services export sector. A few years ago, it would have been hard to imagine that a US president would see India as a potential economic threat. What Obama said is, perhaps, already being felt by multinational companies.

Look at the number of global automobile majors who are bringing their high-end models into India. It may come as a surprise to most that there's a waiting list of four months for getting a top-end car. Auto manufacturing facilities in India are unable to cope with the rise in demand, even during a global recession. ( I am reading the news in paper that high end cars which are really expensive has got 4-5 months waiting list.What that says?)The fact is that once unleashed, there is nothing that will dent the entrepreneurial sprit of Indians. As a young country, there are many years of growth ahead, much of it coming from domestic consumption. So, all the worry about outsourcing getting hit is a bit overdone.
My Comments:
I came through this view in one of the business tabloid.There is someone who is thinking differently ,maybe just like me.
We have seen that analyst and experts are making mountian out of mole.The author has very nicely shown that all is not bad and the apprehension is over stretched.
I donno, but I just read on bse site and in paper that Seimens is actually expanding its operations in India and recruiting more people here.Seimens was downgrade by analyst and we are seeing just the opposite trend.I have always recomended Seimens whenever I have written about A gr stock...
I think now the time has come to take a contra view to when fundhouse downgrades a sector or stock.It is becoming more clearer that they wants to buy and hence they downgrade it.
Another psoitive I have seen is Export growed by 9% in Dec.Industrial output has increased by big margin since last 18 months.So the manufacturing sector is loaded with orders with order flowing back to manufacturing Cos......
I have just take a simple and realistic view.Whatever Obama does, money always flows where GROWTH is.Maybe in ST FII's sell in India but they will have to come back here again....and as the author rightly pointed somewhere in his post, for the first time,US president has counted India as an economic threat......trying to buck up and trying to find place after China and Prez is not ready to put USA even in 3rd place behind China and India.....and speaks volumnes for India internationally......
I have seen people arguing that they expected the fall but when?They said we proved right.But I ask when?They were expecting since sensex crossed 12700 and now we are at 17300 and sheding 1200-1500 points doesn't prove them right.How much they lost while shorting Nifty no one knows.They got chance just once or twice in this whole runup from 12700 to 17200....and that is no success rate to boast of....One will rarely see these experts speaking about how much they lost while shorting market all the way from 12700 to 17300.I have friends who write me and say that they told me to sell and you must have done like that and hence u must have made money.But I never follow them and hence I just keep quite without giving answers to them.Calling correct once or twice makes none a master......that anyone can do it.......2 out of 10 times correct can happen to anyone....
I have friends calling me to ask , whether 12k will come?They says they are hearing this target now .I said, do they think our GDP will become 5% again ?They says but FII's are selling and so market will come down.China is a bubble and it will burst any time.Can one imagine what will be the prices if market tanks to 12k?I don't think that will happen.
I donno then why Warren Buffet and Jim Rogers are investing in China?Who is correct?Some times these so called expert  speaks with so much of confidence that small investors confidence gets shattered.


  1. Obama is not going to be able to get any of his wishes accomplished in a capitalist economy of the US. Also, almost every corporation is doing some business in India, or with India or have elements being serviced by India. With that being the case, how can one pull out the 'amount of business and benefits' being provided in the balance sheet so that Obama can tax it.

    So, all in all, buy this dip in China and India (with equal proportions) for those in the US. For those in India, get into you wish list stocks as we correct, and of course, add stocks recommended by Rajeevbhai.

    We will win......

    On the point of analysts doing sell recommendations, let them do it, since they are the ones that will turn around 180 degrees once the positive earning reports come out.

    Just go long, stay long, and give these business time to mature......


  2. Dear Rajeev,

    Excellent Write Up as usual.
    One more thing US will support India more than ever to counter China which is beginning to behave rather boisterously in the recent past.

    I have been buying all my desired stocks in this recent fall