The Nifty closed lower by 4.94% last week. The NSE benchmark rushed towards 5200 on global turmoil. The markets are now trying to price in US growth concerns along with European debt problems.
The S&P on Friday night put US on “negative watch” along with downgrading of its long-term rating from AAA+ to AA+. This financial crisis may be in a different format with now countries likely to go bankrupt instead of companies as in 2008.
Crisis by its very nature grows bigger with time till there is a blowout. This happens because policymakers are unable to act decisively in time. There only response is to print more money,but it will not solve debt problems. As the current crisis blows up, commodity prices are likely to come down. India will gain if global commodity prices come down.
So in the next 3-4 months investors will get an opportunity of their life to invest in the markets as the Nifty should go to 4600-4700. Investors should avoid capex-heavy industries like real estate, construction, infrastructure and capital goods. Also, avoid all heavily-in-debted companies. Do a SIP in large cap stocks or ETFs. Investment done in crisis is what gives margin of safety and returns.
