Wednesday, April 1, 2009

Bottom formation happening

My key position stand’s remain the same as before:-

  • Stock market to hit the bottom in March’09 to Aug’09 period and immediately start on a path to recovery.

  • Worst news on the economic front – Globally and from India – is yet to come – and will come in during April ’09 to Sept ’09 period. Very initial stages of economic recovery in Oct’09 to March’10 period. However, the recovery will move along very slowly during 2010

  • Sensex likely to go up to 40K (min 25K) by Sept 2013 and 80K (min 45K) by 2016.

Sensex - 10K in one year and 80 K in eight years !

Preponderance of Bad News - 8K Sensex? - and what should an investor do

Here’s some perspective on some of the more recent developments in India and across the globe:-

Current rally: This is the fourth time the Sensex has crossed the 10000 mark after the Oct ‘08 lows. Looks more of a suckers rally. I expect at least another ‘capitulation’. However I’ll admit that this is something I am not so sure about. My basic assumption is that the March to August is the bottom period and this is as far as I can comfortably go in terms of strong estimates.

Indian Economy: Worst yet to come. Some of the Feb and March ’09 data elements, especially manufacturing index could show temporary upticks. GDP growth for Q4 ’09 likey to be sub 5%.

US Economy: Worst news yet to come. Unemployment will peak at 10%. GDP growth will remain negative for rest of the year. The good news is that the new government is taking aggressive action to contain the crisis and that is halting the rate of downslide (though the downslide will continue for a while)

World Economy : The world economy overall will in a recessionary more for the rest of the year, driven primarily by the recession in US , Developed Europe, China (sub 5% GDP) and Japan.

Bottom Formation : What you see now is a classic bottom formation being formed, the saucer shaped bottom at the beginning of an uptrend. Could the markets go down to sub 8K levels again? Very likely. But I have no doubt that the bottom is getting formed.

Stock Investment Strategy: The past six months have been a great time for the long term investor and the next six months too will remain so. I invested 50% of my free cash a month or so back. Plan to invest the remaining 50% at the next capitulation. And if this the bull run, then will probably invest around 14000 levels, since the markets can go that high before retesting Oct ’08 lows.But again, the allocation and timing of investments needs to be cutomized to needs and profile of each individual investor