SAMVAT 2045 : THE ROAD AHEAD
Our current state of mind has an immense effect on the way we think. Though we are projecting for the next year, what has happened in the
current month will have a bearing on what our targets are. Because we have seen a 63.7% fall in the Sensex from the rally high to Monday’s low
of 7697, one can say with reasonable surety that there are better days ahead and the new year should augur well.
While we begin the new year on a buoyant note on the back of yesterday’s short covering and today’s Asian rally, it should be seen as a short
term feature alone.
Atechnical bounce not withstanding, it is likely to get worse before it starts to become better.
While by now every body understands that we are going to see a slow down, the difference lies in the perception, whether the slow down is
priced in or not.
I think it has not been fully priced in. Secondly, as the pendulum swings from one extreme to another, it is likely to make things worse than what
the fundamentals deserve. So we would like to make out a case for more pain.
As you look around in the Nifty stocks, you find that commodity stocks are in a soup. While Dollar is up, the cuts in IT spending which are rampant
in the BFSI space will spread to the manufacturing sector. The slow down in UK and Europe may be more pronounced than Uncle Sam’s. The
Pharma is under pressure as companies revisit their ties, refineries are beginning to see production cuts following reduced demand and higher
capacity coming on stream.
Cutting of the Polypropylene capacity by Reliance, which supplies 70% of India’s requirement, is also indicative of a larger slowdown in the
economy. Polypropylene is extensively used to make sacks for packaging commodities such as cement, food grains and chemicals. It is also
used to make automobile parts such as bumpers, mud-guards and dashboards.
The real estate stocks are already in the gutter. And the sector leaders are yet to admit that they have serious problems. Even the one's that do,
the common refrain