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Stock markets are interesting places. They never behave asforecasted. There are more people making a living by telling otherswhat to do out there than actual people who invest. Simple proofthat no one has got the grip on it. Since evolution.

If you go through the archive of expert forecasts for our markets,the estimation would vary between 27 to !" on the Sensexby the end of this calendar year. #ow, stock broking houses arechanging their forecasts, as if they never made an earlier one. Thenew range seems to be 22 to 27. They are here to makenoise and to get the public to keep buying. They know that everyonce in a while they need a new set of believers as the $rst lot getruined and swear o% the markets. This vicious cycle of conmanshipgoes on uninterrupted.

The point is that the Index, whilst being a misleading thing, is also abarometer of investor sentiment. In a way it impacts investor moodsand makes them bearish or bullish. #o analyst or research house willbe heard if he says that he & does not care where the market goes,but here is an investment opportunity in a stock that I have spotted.I think it is of a company with a great future and available at areasonable price. 'tc and so on.(

)las, the markets are now driven by institutional investors andglobal investors of whom many invest only through some index orthe other. They do not make a real impact on the market in many

instances because their buying the index is often a self ful$llingprohecy.

If we look at the *lobe, most places are facing an economicslowdown. The growth engines are slowing down. The reckless paceat which consumerism grew, is coming down. In every country, thepolitical leader is $nding new ways to destroy the $nances withmore and more freebies. The problem is that many of the largeeconomies are now burnt out cases. +ost of them produce far morethan what they need. So, they have to export. 'xports are shrinkingas each country tries to protect itself. It is an irony. Inward looking

countries are likely to remain more stable over the next ten years ormore. 'very developed- nation seems to have built up a high cost-economy, where everything is expensive and nominal wages aregoing higher and higher at a frantic pace.

India has a peculiar problem. e make what we want and consumewhat we make. ith one notable exception/ 0il. )nd this is morethan o%set by the inward remittances that 1ow from our #Is. 3utthe 0il de$cit is the principal cause of worry, apart from theexploding population, which will perhaps need a natural disaster to

be set right. Till then, the resources India has, cannot feed themoutns it has. +any of the products that we consumer are costed in

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dollars, whereas the income is in rupees. So there is a gap thatkeeps getting bigger.

In a way, the urbanisation, the penetration of communication 4not5ust internet, where we rank a lowly no.6"" are all contributing to

increasing the lifestyle aspirations of over a billion Indians.8nfortunately, the disparity is extreme as opportunities are ratherlimited.

)s an investor, it is best to keep these thoughts in the back of ourmind, before making our shortlist of investment opportunities.9ircling back and forth, we will $nd ourselves coming back tosectors like :+9*, automobiles, durables, banks, pharamceuticalsetc. here we can see this billion people spending and buying.

ill our economy grow at $ve percent;

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prices, but I doubt if there is going to be any big change structurally.*overnment has to get out of driving the banks.

)m I worried if there is a global market correction of twenty percentor more; #ot so much. I do not think that Auality companies in India

are going to shrink. @es, if there is a margin contraction andearnings drop, they may present buying opportunities.

The markets also react in the short term to interest rate signals fromthe 9entral 3ank. The bigger issue is not one of interest rates. BighAuality borrowers get to borrow at below the bank interest ratesfrom other sources. It is the poor risk and the highly leveraged onesthat depend on bank loans. :or them a one or two percent interestswing is not going to make a huge di%erence. There are otherfactors like commodity prices and global contraction that are drivingdemand, sales and earnings. )n interest rate cut of a decentmagnitude, at best, would lower your '+Is and give you some extraspending money. I doubt whether by itself, it will give a push tohousing demand. ight now, the market is caught between a blackbox named 9hina, global slow down and India-s apparent insulationdue to benevolent oil prices on the 08TSIC' and a big struggle forearnings growth on the I#SIC'. So, an interest rate cut would be theend of the bull case for the market.

In all this noise and panic, keep your focus on high Auality stocks. Ifthey come to attractive levels, maybe we could buy. Take advantage

of the crowd behavious and the noise.

3alakrishnan4balakrishnanrDgmail.comSept 2Eth, 26"

mailto:balakrishnanr@gmail.commailto:balakrishnanr@gmail.com