Markets continue to bleed

First the `Cyprus issue and then DMK,s pull out from UPA II.. Cyprus's bail out all of  a sudden  amidst the spectacle of the American markets reaching all time highs served a grim reminder that there could be more ugly surprises.on the European front. We are once again in risk off mode. Cyprus Govt's decision to tax bank depositors has not been taken well. and will generate lot of resentment if retail depositors are not let off the hook.
At any rate its impact will only be limited considering the size and profile of the country.

At home finally DMK has done what it intended to do, i.e.withdraw from UPA. From its recent posturing it never appeared that it  was comfortable supporting UPA.  Looks like at the moment the numbers for UPA are comfortable enough to ensure full term till 2014..

The utter panic in markets today should clear soon and situation should get normal.

However severe damage has been suffered by midcaps. All those glorious midcaps are at abysmal levels and   it is not uncommon to see a midcap stock at a tenth of it's peak levels in 2008. For midcaps the clock has turned a full decade back. This is far greater  damage than one could imagine. It will take a very very long time for interest to return to these.

But of course FII inflow could change all that. And vice versa any outflow would give us the horrors we will remember for a long time.

In line with  what I mentioned in my previous post, I sold  IVRCL and  Reuka Sugar to cut my losses.

Till my next
Happy investing

Midcap mayhem - time to cherrypick ?

For those diehards in the stock market, the recent carnage in midcap stocks has once again dealt a body blow..The extreme volatility has left may confused and even wondering whether to invest in other assets such as gold or real estate. While gold and real estate has its own place when it comes to investing, for diehards like me its the stock markets . Investing in stock markets has many advantages e.g. ease of bye/sell, tax benefit in the long term etc. The important thing is one has to be careful in selecting stocks. And the mantra now is good transparent managements with proven track record. These companies will be able to weather the tough times best.

Tough times have been with us for quite sometime now and looks like its getting tougher . First the rate increases by the RBI. This lowered the the profits of companies and even turned them into loss making ones, because of increase in interest costs.  Then inflation continues to remain high.  Growth rate has fallen to almost half. Unemployment increases, demand falls and a vicious circle starts. The perfect concoction for "stagflation"  - which is a situation where growth falls,  inflation remains high and unemployment rises.  

C Rangarajan  chairman of  PM's economic advisory council and former RBI governor has said that economy is facing stagflation.

It is to be seen what steps Govt takes to get back into the growth path. Until then one can defer any further investment and let the money earn FD interest.  For stocks in the portfolio, its time to get rid of junk companies and wait for puting into only the bluest of the blue chips. About these I will be updating in my following posts.

Until then
Happy investing