I’m reproducing a blog I had posted nearly two years ago on September 27,2008 on what should be the Investment Strategy going forward….this was contrarion in the face of many experts at the time who were recommending selling at every rise…sentiment at the time was getting gloomier….Sensex had reacted from 21000 in January 2008 to 13000 levels at the time…I had said it will seek sub 10000 levels,which it did a month later in end October 2008…Strong advice was to buy at Distress Prices in 2008 for fantastic wealth creation by 2010….this is exactly what has happened
Ab Kya Kare ! ? Should You Buy,Hold or Sell ?
Washington Mutual (WaMu) ,one of USA’s biggest Banks was forcibly taken over by the regulator,FDIC yesterday and sold off for US $ 1.9 Billion to J P Morgan even while the Chairman and CEO of the Bank was on a flight in Mid Air…The quick move was to prevent a collapse as Depositors had already began a run on WaMu and withdrawn over US $ 16 billion in the last ten days
As we move towards Panic,Capitulation and Despondency in Equities with the Scenario in USA turning scarier than ever a lot of friends,family, clients,associates and even my Pay and Park Attendant are asking me “Ab Kya Hoga ?…Ab Kya Kare ?”
This is what I strongly advise…..
We are surely moving towards Distress Prices on the Bombay Stock Exchange and the National Stock Exchange…With the continuing disturbing scenario unfolding scarily in USA,there is clearly more Pain ahead in India as Dalal Street gets Wall”ed in
Critical Valuation Basis remains on Assessing the Sustainable Growth in Earnings…Here is the Problem….Clearly we are seeing a rapid deceleration in the Earnings Growth
The Sensex’ earnings grew by nearly 17% in the first Quarter ending June 30,2008 in the current FY 09 supported by a 33% yoy growth in Earnings in Capital Goods Companies and a near 30% growth in earnings in Telecom Companies and a strong 44% growth in Earnings in ONGC. However, the Sensex (excluding the oil companies) saw an earnings growth of only 12.5% yoy during the quarter…..the lowest in the last fifteen quarters…compare this with the peak 40% growth in the December 31,2006 third quarter of FY 07
EBIDTA Margins contracted by 1.8 % and are expected to contract yet further.Metals and Pharma were the saving graces and saw some margin expansion
The Earnings Momentum going forward will continue to be impacted by hardening Interest rates and double digit Inflation and an economy slowdown,notwithstanding the Minister of Finance yet assuring of 8% GDP Growth this year assuming strong domestic consumption and Investments