ALL IS WELL

Markets for the last few trading sessions are being dominated by neither the bulls nor the bears. Weighing heavy on the minds of all market participants are PIGS. Global investors are worried about the economic fate of Portugal, Iceland, Greece and Spain. No matter how serious the concerns maybe the underlying assumption which we can live with is that nearly all major countries and corporates will eventually be bailed out. Important fallout of the Lehman Crisis is that the world cannot afford another financial crisis so soon. There seems to be a strong unwritten consensus amongst all major central bankers and policy makers on this.

In this background consider the robust domestic economic and corporate growth numbers which have been pouring in from the last few quarters. It will be prudent to consider that we are in the midst of a sustained long term bull market which started in March last year. This current concern over fiscal problems of various European Countries is giving the much needed excuse for a long overdue correction after the bourses have more than doubled from their base values a year back. Worst case can be that this correction lasts for a couple of months more and indices correct some 5-7% more. Nobody can ever catch the bottom or top of any market cycle. Excess valuation has vanished from the leading stocks. Waiting for a further pull down carries the risk of losing out on this buying opportunity presented by the international tensions. Hence our view is that this is not the time to be very cautious. Go out and buy as ‘All is Well’ as far as valuations and domestic growth rates are concerned.