Monday, May 7, 2012

Recovery underway - fears unfounded

image Nifty Down more than 10% from its Feb high and GDP on a consistent Decline. Does it mean things are bad?
Unlikely. Check out the latest indicators, which show that a recovery has already begun.  
image PMI, which is a good leading indicator of growth, has shown a sharp uptick after bottoming out in Nov’11.
image WPI Inflation rates are on a clear downtrend
image Quarter on Quarter corporate profit growth till Dec’11 has shown an uptick. Trend is expected to continue with the March’12 results too.
image Are investors fleeing to the safety of Gold? Not at all. Gold prices have risen consistently till a year back on back of safe haven investment and speculation. But since the past one year, Gold prices have remained stable inspite of all the trouble in Eurozone
image Are the FII’s fleeing Indian markets?  Not at all. The tide of FII outflow started to turn around by Sep’11, and by the beginning of this years, FII were net positive investors.
image So what’s with the Index. Well, Nifty has had a decisive break from the lows of 4600 levels. The current decline is just a just a corrective move or an intermediate decline for now.


So What’s Next?

Towards the end of December ‘11, my analysis had suggested that Macro-Technicals point to a possible bottom. Today the macros are far better than a few months back. US, China, Japan, Brazil and Russia, comprising more than 50% of world GDP are in various stages of bottoming out and recovery. However, there is no denying that that the Eurozone economy is sliding into a recession and the worst is not over for EU.

I believe that the uptrend that started in Feb’12 will continue and the markets would very likely make a new highs over the next few months. Any shock caused by Eurozone would just continue to provide good entry opportunities for the long term investor.