Inflation-Bigger Fear than U.S. Reccesion?

inflation_1.jpgEverybody knows that the BSE and NSE are taking cues from the global markets, especially from the markets in the U.S.A (Dow-Jones,NASDAQ). Two weeks back, the Saudi Arabian Government decided to boost oil exports and manufacturing from its country. Reacting to this news the Dow-Jones surged 300 points in the green.

The end result? Two weeks back, on Tuesday, the Sensex experienced a record surge of 928 points. Why am I sharing all this? Because this clearly implies that the BSE and NSE are dependent on the U.S. markets for any kind of movement. While some investors would argue that the current scenario is best for investing, I would rather say that the worst is yet to come.

For starters, the U.S market is expected to fall into recession for a year or two. With stock prices hitting an all time low, some would feel that this is the only bad news they will have to handle. But wait…that is not it. With inflation hitting an all time high of 7% and with commodities prices going over the roof-top’s, one can predict that the market is heading towards a long term bearish market.

Though the long term outlook is looking to be bullish, one cannot rule out the fact that investors can face heavy losses here in a period of 6-7 months. The Indian market has already collapsed a whooping 30%, making us one of the worst performing global market this year, along with China.

It is quite ironical, considering the fact we were one of the fastest growing markets last year. But it seems like the tables have turned.

What does a retail investor do in such a scenario? A scenario wherein FII’S start selling their stakes whenever they want, add to it the inflation and recession worries. Frankly speaking, no one has the answer to it. Because our growth rate is slowing and, simultaneously, earnings growth will slow down, the interest rates will remain at high levels and policy moves will create distortions. At the moment the numbers and statistics just don’t seem to be in India’s favor.

Probably the only thing that they can do is wait and watch. While some people have started slow accumulation of large cap stocks, some people have lost faith in this bearish market.

But like , Executive Editor, CNBC TV-18, was saying, “The good news is, all this will not last forever. The CHINDIA bull story is not over for good. No i am not about to sing you the favourite tune of all trapped bull which goes…’the long term India growth is still….”


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