Saturday, June 22, 2013

My recommendations for investments now:

On 19th June, US Fed indicated that they would end the QE3 by middle of 2014. Ever since then, the markets globally have been in a tizzy. The Indian Rupee crashed to almost Rs. 60 to a USD. Gold went down globally to $ 1200 per ounce from around $1350 per ounce. The Indian stock market fell by 526 points in one single day on June 20th. The Indian bond prices crashed and trading had to be halted on 20th of June.

As we all know, for the past few years, the central bankers in developed economies had resorted to a money printing spree -just to keep their economies propped up. This excess liquidity kept the interest rates in developed economies low and this cheap liquidity found its way into  financial assets globally including the Indian stock markets.

The global investors were riding the proverbial tiger and there was only one way out – to keep on riding or be eaten up. And now the US Fed has given a timeline to end the ride.

So where do we invest now?

My recommendations are as follows:

  1. Equities – For those who are new to equities, you must stay away from the equity market for the time being. If you are into equities already, I believe that you will not make much money in equities till the next elections.  However, there will be opportunities to invest due to the gloom and doom - if one looks at select stocks. For example – TCS should do well as the Rupee devaluation will play to its advantage.  So I would recommend investing in select stocks where there will be opportunities and then stay invested for a few years.  You can write to me and be part of my private equity mailing list where I share my buy and sell activities in the equity markets.
  2. Debt – Long term debt funds are not safe at this situation. I believe with the weakening of Indian rupee, RBI could be forced to raise the interest rates. It is best to keep money in liquid funds or in dynamic funds.
  3. Gold – even though the whole world is looking away from Gold – I am starting to see some value here. If you have gold – hold on to it.  I am not recommending that you buy it now – but I believe if situation in the global markets gets worse in the coming months – then it would be time to invest in gold.