panch-tattva talk…have perspective

Friends,

The economic malaise emanated from USA and afflicts USA the most but paradoxically the fllowing figures show that it has been least affected in terms of loss in indices:

Index / Value(241008) / 1yr Loss

BOVESPA. 33818. 46pc
(Brazil)
SSEC. 1975. 66pc
(China)
CAC 40. 3310. 43pc
(France)
DAX. 4519. 43pc
(Germany)
Hang Sang. 13760. 52pc
(Hong Kong)
Sensex. 8701. 53pc
(India)
NIKKEI. 8460. 51pc
(Japan)
KOSPI. 1049. 49pc
(S.Korea)
FTSE. 4087. 38pc
(U K)
DOW. 8691. 38pc
(USA)

You may have observed that the DoW has lost minimum over the year of turmoil. It may be so that the emerging markets had investements flowing into from USA and this was keeping their indices high and being small markets , the impact of withdrawal of such investment, has been more. The withdrawal was necessitated by the need to have dollars back to USA for the last ditch attempt at saving the day. This way , not only the indices have suffered heavily , these indices have representatives with tremendous value in terms of assets and earning potential. This opportunity will be exploited by some or the other long term investor as soon as the confidence returns. Indian PE at 11.8 (forward PE of 8.7) is very enticing as India is expected to post second best performance in GDP growth at 8.4pc . China would grow at slightly higher rate. The developed world economies may only grow at sub-2pc . There will be middle range performance for other countries covered above.

The October end inflation rate was 11.1 pc and 10 year G-sec Yield at 7.8pc , the real interest is negative therefore. The inflation was at under 2pc in Jan 2002 and the yield at 8pc . This is clear that the real rate of interest was at good +5pc. It may therefore be seen that the industry in not foing to be adversely affected in India in medium to long-term, however, the short term may see irrational moves.

Now the money supply situation in terms of M3 is quite comfortable which is plus 20.3pc over the year at 43,14,125 crs . The only component that was showing the lower number was deposits with RBI. Term deposits with banks are up 20.8pc. Clearly people are seeking comfort with bank deposits particularly with PSUs. I am sure this will be corrected and the funds of local people too will be getting back in to equity arena. Sheer values do not keep lying around for long. It is only that some have to show leadership and some companies start their upward march.

 

HariOm,

krsnaKhandelwal