2010 Expectations

On Jan 1st 2010, many newspapers and media TVs were busy predicting the stock markets. They said market has run up a lot and 2010 would start with a huge profit booking. Contrary to their thinking, markets have rallied.

Reasons for the Year begining rally could be:
1: Monsoon got set very late. Hence in the initial 2 quarters, companies were cautious on their profit projections. But with above average monsoon, many companies are expected to post bumper profits.
2: IIP data (Industrial Productivity) for the month of December 2009 is 11.7% agains 10.3%. And that too, Capital Goods and Manufacturing sectors have shown double digit growth. This endorses the view that Q3 numbers would be much better.
3: When quarterly results are better, the Price Earnings ratio gets rerated resulting in further rally in the stock price.

Above mentioned facts would keep the markets intact. Hence Q3 results which started coming today (12th Jan 2010) may continue till end of Feb 2010. As a result there is no major risk in the market conditions.

What Should Investors do now:
It is ideal to book your profits and sell a portion of your portfolio before end of Feb 2010.
We expect markets to fall post budget (26-Feb-2010) for following reasons:
1: Inflation which is currently about 2% is expected to rise up to 8% to 10% by March 2010. That is a 400% to 500% rise.
2: Rising markets cannot continue for ever. A logical profit booking is very much possible. But for this to happen, there should be some bad news. This time around it could be your inflation.
3: RBI Would be FORCED to rise interest rates. As a result all banks would rise deposit interest / lending interest rates.
4: Another bad news could be: Probable ambiguous budget speech by the Finance minister, which could lack on the reforms front.

Hence investors can consider holding 40% of their investment value in cash, by selling securities before Feb 2010 end and wait for suitable buying opportunities post budget.

Disclaimer: Budget releated comments or Results related views are only an estimation. It need not be correct. The author holds no responsibility of profit or loss created on such events. There is no intention to spread rumors. The article is posted only in the intention of genuine investors who intend to grow wealth by avoiding mistakes.