Why our markets are falling and falling hard

Why our markets are falling and falling hard

Postby lakshmi » Tue Feb 01, 2011 6:30 pm

Excerpts from a firangi newsletter

India, appears overvalued, at 25 times earnings. The problem with India is that its government can't stop spending money. Even with economic growth of more than 8% in 2010, the budget deficit (including both national and state budgets) is around 10% of gross domestic product (GDP).

Add to that an inflation rate that's persistently in the double digits - and an ongoing balance-of-payments deficit - and you have a country that is severely in danger of experiencing a credit crunch.

India's P/E ratio of 25 takes account of the opportunities available in that market, but not the risks. Avoid India for now.
Lakshmi Ramachandran

Jodi Tor Dak Shune Keu Na Ashe Thobe Ekla Cholo Re,
Translated, "If they answer not to thy call, Walk Alone"
Rabindranath Tagore
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Re: Why our markets are falling and falling hard

Postby trader77 » Tue Feb 01, 2011 8:07 pm

MAM,

Whoever is saying that India is expensive now, was trumpeting a few months back the Indian equities are expensive but its worth the price because that's the only place that is showing growth!

I would never believe the media/FII explanations. To me the only thing that stands out is FIIs have poured humongous amount of money in 2010 and have taken out only 5000Cr so far in 2011. Just to compare they have poured in about 130kCr into Indian equities including IPOs.

The problem is that our markets are very shallow in terms of buying support because the Mutual funds/Insurance companies can't buy a lot if FIIs start selling massively.

And FIIs are net Short 5000Cr in index futures at this point (they even covered about 730Cr today). They typically wait for sentiment to become hopelessly bearish and then start buying. So it all depends what they do for next few months.
"Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only
recover their senses slowly, and one by one.
- Charles Mackay, Extraordinary Popular Delusions and the Madness of Crowds
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Re: Why our markets are falling and falling hard

Postby lakshmi » Tue Feb 01, 2011 8:50 pm

Girish, that is just what i wanted to say. If firangi newsletters say avoid India for now then we could expect more selling. Of course we should start sipping slowly and wisely
Lakshmi Ramachandran

Jodi Tor Dak Shune Keu Na Ashe Thobe Ekla Cholo Re,
Translated, "If they answer not to thy call, Walk Alone"
Rabindranath Tagore
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Posts: 1592
Joined: Mon Feb 23, 2009 7:39 am


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