The Current Scenario

There is a lot of panic in the market. But do we need to worry that much????? I have few points to make here:

1) The economic crisis in the world is going to stay for some time. Generally developed economies have a life cycle of 25 years or so while developing economy have smaller cycles of 5-10 years. We see the turbulence in the US economy since the 2000. In my opinion crisis in US economy is going to stay for some time (something round 5 years).

2) In such a scenario there will be a slow down and there will be less spending. Today we live in a global economy scenario (and we can see the impact..If one major economy threatens to go in recession, the whole world looks like following it). In such a scenario investment will flow to those part of world where the growth aspects remains strong. India and China in the recent years have earned this repot. Thus I feel that the inflow of foreign investment will continue.

3) The Investor at present time are fleeing from Indian market due to primarily two reasons:
i) Political un-stability. We have already gone through a vote of confidence in parliament in last sixth month. Inflation has crossed all the limits and that is the biggest issue for Indian voter. Elections are near by so it seems a lot of equations and volatility is expected in Indian politics. So it is a safe way to leave India for now and when this political turbulence get settled re-enter after spotting the new players. (Yes, with each government, the players get changed...every one knows BSP-JP, congress-GMR tie-ups).
ii) There us panic for credit. No body is sure what is going on. Lehmen, bear sterns, Merrill lynch, Morgan Stanly all big players are down. Citibank had huge right offs. No body knows what’s the actual situation is. In such a scenario it is better to have your dear money, right close to your heart not in any bank

Thus I feel that once this political crisis will be over from India and the panic and disbelief will fade from the world we will see massive inflow in the Indian economy. This will take the time of something round one year. So long term investors have nothing to worry about.

People who always wanted to be part of that golden run of 21k of sensex but some how missed the trains should be all set for cherry picking. (If you are getting Suzlon for 90s and ICICI for early 300; I bet its a good deal. ) Even reliance industry is getting heavily corrected. This is the time to pick these cherries in your basket and forget it for one year.

Short-term traders have to be really on their toes now days. In such volatility even a small roomer may spoil everything defying all the logics. ICICI is the best example, even after repeatative statement from RBI, FM it is loosing its credibility. Yesterday, I was suggested by a CA from a small city to play safe and have least possible amount with the icecap bank, with which I hold my salary account...(I turned down his suggestion, of course) I was astonished to see that how the most dear bank of Indians lost all the faith, despite FM, RBI are repetitively issuing statement in its favor. Yes, Even I thought for once that, if not the present scenario then this loss in faith will really impact ICICI very dearly and its future is skeptical. But this thought could not stay for more then one second. Such a well-regulated bank may have some losses due to crisis but bankruptcy is a totally different thing. But yes, in my opinion, it will really adversely affect ICICI profits. In some way I am happy as I am expecting even more aggressive banking from them and some good offers and in this scenario of credit crunch and realty bust I will be really pleased if such they have something to offer...something extra....

Coming back to investment strategy, for short term traders the name of the game is "book your profit" (if they are there)... you never know kal ho na ho...... market is going to be a lot volatile. See if you can sustain that.