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The Rain Fall and Shanghai Fall to Aid D-St

The China’s pain is eventually going to be the India’s gain as the China’s benchmark Shanghai Composite which fell 13% during the last week and out of which the 6% dived solely amid the worries of recent rally fuelled a stock bubble and on the contrary India has gained by 4% last week.  The Chinese stocks have catapulted 120% as compared to 7% by sensex during the past one year. The comparison between India and China is due to the obvious reasons as the part of the foreign portfolio investors (FPI’S) have been pulling out of the Indian equities and shifting focus towards China. The reversal of the same is a little farfetched and hovering around the horizon because as of yet the valuations of the Indian are at par with the Chinese and there is no hint of any recovery of the corporate earnings growth in India. The investors in India are content with the fact that MSCI deterred to include China. This exclusion of China has only helped the outflow from India for the time being and if China would have been included in the MSCI than its weight would have dipped on the MSCI. So in the near future if the crash in China deepens India is a sure bet to be benefitted as the reversal will take place by India becoming overweight and China becoming underweight. Moreover the uncertainty in the foreign flows to the emerging markets including India is solely due to the global bond volatility and the redemption pressure. These are the times when India cannot be immune to the global volatility but India is surely going to be the front runner amongst its peers owing to the improved domestic macro economy, end of the earnings downgrades and the improvement in the government’s spending.

There climate at the D-St has become pleasant owing to the monsoon and the decision of the Federal Reserve. The current valuations are enticing and so as an investor one should keep the selected shares with the long term perspectives only. However the ways to steer clear the Greece default are yet to be concluded and maybe Germany may come up to bail out Greece until then these clouds threaten globally.

The monsoons came on the right time washing away all the fears and boosting the moral and the excitement in the D-St. The rains and the index profitability are correlated and this is the right time to buy the value stocks. As the recent correction have made the valuations very attractive and after every correction a stable growth is the natural fallout or outcome. In the index the banking shares are looking very promising, and the reserve bank have permitted the banks to convert the loans into the equities which will help in easing the pressure and ample growth will be seen in the banking sector as the investment by the foreign investors in the banking sector is very healthy. Globally there is a positive wave of sentiments with the Federal Reserve’s decision to postpone the rates by September that will be just one hike instead of two in a year that too despite slow recovery in the US it steered away with a minor warning. On the other hand the European Union and the IMF have not come to any conclusion regarding the Greece default could be forced to opt out of the Euro zone, however the leaders of the Euro zone will meet again to bail Greece out of the crisis and the Germany may play a vital role. The fear of the economy bubble in China may burst.
As the repo rate has been slashed which will have positive effects on the economy, credit growth and so also the new leash of life will be infused in the treasury yield, and so the time is correct to bank on the banks.

In this financial year of 2014-15 the government may remove the burden of the subsidy from the upstream and the oil marketing companies. As the prices of the crude came down brought the stability in the markets and the gross refining margins were much better than anticipated.

The recovery seen of late was due to certain measures taken by the central government like the clearance of the land acquisition bill, GST, improving the business friendly norms relaxation in taxation.

At6 the moment many large cap shares are trading at much below historic average P/E, and certain mid caps are also available at very attractive rates. The private sector banks, housing finance companies and those involved in the insurance NBFC, and even the media companies are looking to be very promising.


In every rally the investors get the opportunity to make money, but when the markets go bullish and when any investor buys certain shares than he’s bound to make more money than average. However the nifty will be 8, 000 to 8, 400 range bound, and the investors will never regret if they invest in the quality shares.