panch-tattva talk….IIP numbers impact Nifty

Friends,

The Nifty was on sound footing in the morning of the week’s last day of business , then came in the announcement of IIP index showing just 3.8 p.c. growth in May 08 against the growth of 10.6 p.c. During May 07. Now there are two ways to look at it ie think as a pessimist that since it is down , it may continue to remain on downward course or think like an optimist that since it has come down it will have no difficulty in improving performance. Both scenario are OK as far as possibilities go but think in terms of what will give you better risk/reward ratio. If you invest at todays levels your chances of making larger gains will be defenitely more than chances of loosing a large portion of your investent. This is plainly explicable in light of historic performance of market which has hardly put investors to loss after a correction of the order of more than 35 p.c. , generally and still more in certain stocks which also show promise ahead. Secondly , when the tide turns it turns very fast after steep falls. This is particularly true of developing economies and ours is a fast developing economy. The positives of inflation angle have already been discussed by me earlier. In fact I dread to invest in a market that is slowly going down for it may erode capital over a time to a very great extent in an unnoticeable way . But after the big corrections of sudden nature, similar to what has happened over last six months , it does not allow any further downward movement for a longer period of time. This is, at least, not possible to happen in case of an economy which has a large number of people to be pulled over the poverty line  and also has younger average population. Whatever I have advocated is not a blancket advice to invest in a reckless manner . Discretion in choosing companies in right sectors is implied in my advice. I am encouraging you for it is not the time to behave meekly and it is time to put your cash resources to work as the cash is eroding in value even otherwise due to inflation. I do hope you catch what I mean and the Nifty closing at under 4050 should not unnerve you.

HariOm,
KrsnaKhandelwal