Review results. Re-calibrate responses.
If some good happens to the Indian economy, it rarely happens by design. It is either by accident or by compulsion. So, what good can one look for in these gloomy times? The dark monsoon skies hovering outside your window is the first harbinger. With the monsoon rains filling dams and running out of them into the agricultural canals, farmers will need to spend little or no diesel. With hydel augmenting the power generation, factories and commercial establishments have significantly cut down on their genset power. Demand destruction in diesel is the first good news that you can look out for. But, that is truly a sidelight of the monsoons spectacular throw and its power to change economic outlook. Food imports will be a thing of the past given our all-time high sowing and bumper crop – in – progress. Actually, agricultural imports of all kinds should recede this year as other cash crops like cotton rise to meet and exceed domestic demand. The prospect of agricultural production exceeding domestic demand has already kick started exports of wheat. In an export starved state, all exports will bring good tidings for the economy. The prospect of demand destruction in fuel consumption and freeze in agricultural imports are but grass shoots. Much more needs to be done in a state of emergency. This Government’s economic fumbles are comparable to Hanuman’s tail and it would be reasonable to expect them to elongate so much that they will ultimately liberate us from this model of Governance.
Even in the worst times, the stock markets always throw up good parts to partake from.
When the fundamentals of a business suffer a serious impairment, its valuations will certainly reflect the damage. The extent of damage to the business fundamentals will reflect in the valuations subject to the market’s perception of the financials. As evaluation and disclosure by the company takes time, the markets speculate in the interim on the extant and impact of the damage. Fear usually plays its part and markets often reflect in the stock price far greater damages than the actuals. Fear plays the culprit and investors inevitably overreact. This could see the markets becoming excessively pessimistic. In the event of any positive news, the beaten stocks tend to rally sharply. This trend of reactive responses is a bear market phenomenon. We have seen this in several scrips including market leaders. The coming weeks will see this trend play out as the business fundamentals create reassurance in the investors’ minds. Being too negative will have to be recalibrated into being cautious.
Calibrated investing is the need of the hour.