Friday, April 14, 2006

Party Over?

- 3 record months of Mutual Fund collections

- Property prices 100% up over August '05

- Gold, metals and commodities at record high

- Housewifes turned day traders

- Taxi Drivers buying stocks

- Stock market increasing 25% in 3 months comes the headache

- Oil at $70... and predicted to rise

- Looming war in Iran...Attack in June (the US always starts a war in June)

- Falling Rupee...with oil zooming, the rupee has to tumble

and the hangover...

- Falling Rupee means FIIs will pull out of India becasue market gains will be offset by the Rupee fall

- Because almost everybody in India has put money into stock, funds, property, or gold in the last 6 months, it looks like there isn't any more liquidity left

- Will the oil companies revise prices? Yes, within a few weeks, making all products a little bit costlier

- Iran war means OIL is in trouble and all big projects are postponed

Yours truly predicts the party in all Indian markets is over:

- Get out of your Mutual Funds

- Get out of your Stocks

- Get out of Gold (partially, though Gold is always good longterm)

- Get out of Rupee if you can and into Euros

- Get out of Art, your Jamini Roy has reached its peak

- Postpone all Property Purchase decisions

- If you have any Property that you have wanted to sell, start doing it ASAP

Safest things right now:
  1. Fixed Deposits
  2. Cash
  3. Euros
How bad will be the crash?

- Actually the fundamentals of the Indian growth story are real, but becasue of speculators, the markets are off, so expect corrections

- The stock market is about 20% off, so expect a correction to around 9500 to 10,000

- Property market is anywhere between 20% & 50% off, so expect some serious corrections there

- Gold has historically shown only an upward trend, so if you have sustaining power, hold on, else sell. I would say Gold will undergo a 10% correction

The best thing to do... start a new business or invest in the growth of your own business or a known venture. India is ripe with opportunity in almost every sector. Look for good management teams and invest in them, they will reap a great harvest and beat ANY gains you can possibly make by speculating.

...if you buy property, make sure its rentable fast. Don't buy for speculation, buy to earn from day one

...and please get rid of your Indian art. Thats an overhyped bubble of paintaings that no self respecting European gallery will even stock, only bought previously by Indians from each other because they couldn't afford real art. Now hyped by speculators who don't know the differance between a Tayeb Mehta, a sofa, and a Pablo Picasso (was Pablo the same as Picasso they ask;) )

Follow up note (16th April 06) The day I posted this the Bombay Stock Exchange fell 342 points and the next day it fell 118 points. While this may be profit booking, it could also be the factors mentioned above in play.

Follow up 2 (18th April 06) The market wiped out all its losses and even made a nice gain. The results of TCS, BHEL and other companies were extremely good and the outlook is bright.

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