Typical ~ Equity Investors are piling on at these Highs ~ they need to be cautious

Sensex has crossed a record 26000 & Nifty is now ahead of 7700

Typical ~ Equity Investors are piling on at these Highs  ~ they need to be cautious ~ especially those who are returning or initiating fresh exposure now not having done so in 2013 or earlier in 2014 ~ advisable to await the post budget scenario as there is a high probability that once euphoria abates the Sensex and Bellwether Scrips may correct 10% or more…the real danger though are the small caps and midcaps that have run up crazy,some over 100% in months…they may correct 25% to 50%…yes that high !  

At June 30,2014 ,Equity mutual funds saw record absolute rise in average AUM in the quarter, up by Rs 33000 crore or 16% to Rs 2,36,000 crore led by mark to market gains and inflows. The equity funds’ contribution to the gains in the industry assets was the highest among all categories

While this is to be expected on the back of the resounding BJP Victory and Narendra Modi assuming Prime Ministership there needs to some caution that should be exercised especially by those seeking instant profits and gratification as Sensex has crossed 26000 levels and seems to be running a little ahead of fundamentals for the near term on the back of  BJP & Narendra Modi sweeping the elections,FII Net Inflows exceeding US $ 8 Billion in 2014 till date and Great Expectations from the Budget in particular and the Government in general going forward

Great Expectations from the Union Budget this Thursday are countered by great challenges that continue to confront us on the economic and geo political front…Iraq & Ukraine Tension can escalate further causing Oil Price to surge even further past US 120/barrel and putting pressure on the Rupee…though a lot of the pressure has been taken off by record FII Net Inflows into India this year into both Debt & Equity

The Budget Backdrop is :

High ~ Inflation,Deficits & Debts

Low ~ Economic Growth with Manufacturing sector that needs urgent revival

45% + of the Projected FY 15 Fiscal Deficit has been reached in the first two months April & May  of FY 14 itself 

There is little room to lower Interest Rates immediately….so manufacturing thrust can be provided through diluting the Land Acquisition Act and opening out or increasing FDI cap in many sectors

It is commonly expected that the Budget will be kind to the Infrastructure,Housing Finance,Power & Banking Sector….a major beneficiary of this should also be the Cement Sector

Government Coffers are empty and quick receipts will be a key objective

Direct & Indirect Taxes are unlikely to be raised except for Tobacco Products….In fact Individual Income Tax Exemption Limit is likely to be raised significantly

So where will the Big Money come in quick ?……PSU Disinvestments……. Target may exceed Rs 1 lakh crore …that’s the quickest way inside months to get the monies in without having to pay back and thus rein in the Government Borrowings  too…..what this will do is mute the share price momentum on PSUs like Coal India & ONGC from where Government is likely to raise Monies by diluting their stake further….unless of course these PSUs too are provided a huge Budget Thrust

Monsoon appears to have revived in July after playing truant in June….government has warned of drought situation across the country

Of Course the Long Term beckons to all to remain Invested in Equity for a great Wealth Creation Opportunity in the next 3 to 5 years

The caution I have expressed above is really more for the newcomers and those returning to equity on conviction being strengthened and for those who are reinvesting short term gains back in….advisable to observe post budget scenario before committing   directly or to Mutual Funds…because if you’ve missed such a lovely run so far might as well take a chance to miss any quick post budget run and get in when some stability is seen….considering there is a strong probability of a post budget correction too

Traders & Speculators playing the Volatility should do so with strict stop loss….better yet not to play till post budget air clears

If you got some short term profits take them off the table and don’t be in a hurry to reinvest back in Equity…the reinvestment risk can play up in the near term 

Hope our FM,Mr Arun Jaitley delivers a game changing Union Budget despite the challenges our Economy faces

Cheers !

PS : Sensex has cracked over 200 Points and sunk below 26000 post the Railway Budget this afternoon with Share Prices of Companies associated with Railways Business correcting over 10%….Is this a Tuesday Trailer before  the Post Union Budget on Thursday !?

 

One thought on “Typical ~ Equity Investors are piling on at these Highs ~ they need to be cautious

  1. Central Budget : 2014

    Dear Shri Arun Jaitleyji,
    Even as you proceed to present Central Budget to Lok Sabha on 10 July 2014 , please look out the window of your car and see the ” Poor ” people on Delhi’s footpath
    Then , like Mahatma Gandhi ask yourself,
    ” Whatever budget proposals that I am about to present , will these bring a smile to the faces of these poor ?
    363 million poor Indians , who eke out a survival on expenditure of Rs 32 ( rural ) or Rs 47 ( urban ) per day ? ( $0.5 – 0.8 / day )
    For a family of 4 , that works out to , Rs 3840 – Rs 5640 per month
    ( $ 64 – $ 94 per month )
    May be the head of the family manages to earn Rs 2,000 per month , doing odd jobs , here and there
    The rest of the income must be coming thru ,
    * Wife scavenging the garbage heaps for discarded plastic bags / bottles
    ( when she is not salvaging discarded food ! )
    * Children begging on the streets ( you will see them as you drive to Lok Sabha )
    Now if,
    * Our population keeps growing at 15 million per year
    * Inflation keeps rising at 10 % per year, necessitating raising ” Poverty
    Limit ” by 10 % per year
    Then ,
    * How many more people will get added to “Poor “population, every year ?
    May be 5-7 million/year ? 25-35 million by 2019 ? Taking the total to 400 million ?
    Mr Jaitley ,
    Can you listen to their anguished cries ?
    They are ” begging ” you to create jobs for them , so that they can work hard and earn an honest / decent income , which can lift them above that wretched ” Poverty Line ”
    They don’t want your dole-outs / subsidies for food / LPG / Kerosene etc !
    They don’t want to remain dependent on Sarkaar – Maa Baap , for ever !
    Sir ,
    Can you ( ie Central Government ) give them jobs ? To even 50 million / year ?
    Assuming that creating ONE job calls for an investment ( in fixed assets + working capital ) , of Rs 1 million ( Rs 10 lakhs ) , you need,
    * Rs 50 MILLION * MILLION , every year !
    And YOU just don’t have that kind of money !
    Even as { Rs 500 MILLION * MILLION } of Black Money is locked up in un-productive assets , all over the country !
    The only way you can create those 50 million jobs / year , is to enable these Black Monies to turn into WHITE MONEY and get channeled into Infrastructure / Manufacturing / Services etc
    And the only way you can do is to ,
    * Introduce Amnesty Scheme ( now / immediately )
    * Introduce INVERSE TAX REGIME ( in 2015 Budget )
    I have sent these proposals to Shri Narendra Modi / Shri Murli Manohar Joshi / Shri Nitin Gadkari etc , during the past 8 months

    * hemen parekh ( 08 July 2014 / Mumbai )

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