The Indian Bull – THE MACRO VIEW

Hello Investors’ One Question is running in my mind from last couple of weeks “WHY INDIANS ARE SO OPTIMISTIC ABOUT BULL MARKET IN COMING FUTURE”?? The answer to this question may throw some light on the feelings of Indian man about its market / the future growth on India / the rising Indian economy. Indian economy is no doubt on the growth path and truly it will rise exponentially in future to come. The financial black hole has eaten up some biggest financial firms in USA last week; Lehman Brother, Merrill and AIG (who begs loans for government for its survival) are name to few.

Indians always think of lower-rates and strong earnings and I too. Elsewhere bears are ubiquitous, but behavior has not become ultra-bearish yet.

Two-third of Fund managers in India are outright bullish, some extremely so and many are puzzled as to why the Indian market has fallen at all this year and why foreigners have been the net seller. Now a More Good News comes here that Indian market has outperformed MSCI Asia ex Japan by 25% in last two months, Also Indian domestic equity fund market has enjoyed a huge increase in average monthly inflows of INR 40 billion this year, compared to INR20 billion last year.

IN SUPPORT TO BULL RUN IN COMING FUTURE
Here I am trying to support my views “why I am bullish about India long term growth story” by giving some facts. I might be wrong here so I request you all to please correct me if I say anything not-correct

Now let me give you an interesting overview of psychology about managing money, I hope you will enjoy reading it:
If anybody continues to receive the cash to invest, he/she will hardly feel too bearish and this is double true when you live in a country whose long term growth is tremendously optimistic.
End of tightening cycle Lead by RBI
Maximum numbers of Indians believe that inflation is now close to its peak and is bound to fall in next quarters. Also commodity prices are falling and they are too close to peak out. These two main factors will force RBI to cut the rates within next few months in my opinions. The movie created by RBI in late 2004 is going to over very soon. Further falling in commodity prices lead to higher earnings of companies
Fall in oil prices will load-off some pressure from government’s budget. And the main point what I am thinking is that before elections govt will lower the fuel prices and pressure the RBI to cut down the rates for a better political environment.

The US economic condition: Now Indian investor knows to the financial crisis in US lead by credit crunch. I am pleased to see that many know that it will not affect India too much due to its domestic exponential growth. Indian companies are sitting on the mountain of cash they earned in last five and have very low leverage

Strong inflows
Domestic Indian equity MF inflows in 2008 = INR 272 billion
ULIP Inflows grown by 170% this year
In Korea, in-flow has fried up.
In China many recently launched MF funds failed to attract as much investors


The truth that we have to accept is that “investors have reacted to the stock market sell-off and gloomy macro news by hankering down and doing little.

The Main fear-factor
The rise of the dollar against the rupee has almost nullified the fall in Crude Oil price. Dollar has risen from Rs 40 to Rs 46 in just few months and that is nullifying the effect of fall in crude from 150 to 100 USD/bbl. For sharp up move in market, dollar has to settle in some lower range.