The last quarter has been bad for the equity markets. The Government borrowing is going through the roof and Gold prices are declining. What does an Investor do next? Lets try and work out the best investment avenues.
1. The Goverment has ended borrowing about 66 pc of their full year target in the first 6 months. This means in H2, they will borrow more. This means Rates will go up and Bonds yields have risen. Gilt funds will still have to wait for sometime or one can do a SIP in Gilt funds. Interest Rates are yet to peak out.
2. The US Dollar is strengthening due to safe haven status. This means all other currencies will weaken against the Dollar. The rupee may go down further and all commodities including Gold can correct 10 pc more. So, buying Gold doesnt make too much sense right now.
3. The Equity markets have been going down. There is fear and panic everywhere. Support levels are 4538, 4300, 4000 and 3700. One can start adding near each support level about 20 pc quantity.
4. Other Option is to invest in liquid funds or stay in cash. The inflation will eat away the value of Cash and liquid funds may give up 7-8 pc.
5. In the long term, if India has to do well, then the Equity markets have to do well. As Warren Buffet says, when markets fall the environment is so bad that no one ends up buying anything. Now is the time to build the future and start investing for the next 5 year horizon. SIP in Stocks which are of good quality.
The Nifty has support around 4900, 4840, 4720 and then 4538. upside resistance is the band of 5030 and a cluster of resistances around 5100 and 5200. Fresh shorts below 4840 and longs above 5169.
For those interested in stock picking in the downturn, I am enclosing the link of Lakshmi.
She has come up with the updates for the month of October 2011. I have helped in identifying the stocks on the basis of fundamentals.
Investment Cherry Picks