Investonomics-ManFina-Series 9

Time to trim!!!!

Stock markets today reached a high of 5629 and closed at 5505 with a corrective note on account of Greece debt down grading by Fitch to near default. While the index hardly fell by 1.5%, stocks in general fell around 8-10% on an average. As already suggested in my previous blog about the market range of 5400-5700 and to increase exposure in G-Sec while reducing the same in Equity, we stand tall and right in our approach to portfolio management and justice to our client portfolio. As propagated it’s the time to reduce the trading quantity in stocks, using options as investing strategy will certainly help clients minimize their losses while remaining invested.

There were some news and events and data in last week which are worth noting before taking great exposure in Equity market. I would like to highlight some of them as these events/data has the ability to jeopardize the rally which we have seen in the recent past. These news have been collected here from various sources for the sake of knowledge of the reader of my blog for their understanding on how to approach markets when we have these kind of news flows

a.       “Euro zone unemployment reached 10.4 percent at the end of last year, its highest      since the introduction of the European single currency, official data showed late last month. It is seen peaking at 10.8 percent in the second half of this year.”

Comment:This might keep industrial activity under check in EU and will dampen GDP Estimated figures

b.      “China's manufacturing sector contracted in February for the fourth straight month as new export orders dropped sharply in the face of the Euro area debt crisis. Trade data for January showed imports and exports falling at their fastest rate since 2009.”

Comment:This indicates that actual consumption even in china is not showing pace of recovery despite Central bank of china cutting rates by 100 basis points in last 3 months. So we can’t say that even if RBI cuts rate in India, we can expect demand in Industrial goods/Services or a resultant effect on GDP

c.       Fitch ratings agency on Wednesday slashed its rating for Greek sovereign debt to “C” from “CCC,” indicating that default is “highly likely in the near term. In Fitch's opinion, the exchange, if completed, would constitute a 'distressed debt exchange'           

Comment:If history is to repeat itself, one can expect sub prime like crisis in Europe but this time it will be default on soverign debt involving many nations. So we have to be prepared for the worst ever corrections in Equities as and when it happens. Idea is to keep low exposure in Equities now so that whenever this kind of crisis happens, One has the fund to Buy Blue-chip stocks at reasonable throw away prices. This correction will be lifetime buying opportunity.

For dynamic Asset Allocation advisory on the basis of above opinion, contact me on my mail