Even the big guys got the markets wrong. The Mint has reported this in it's 4th July edition. Here are some excerpts of the same. After the first fall in the stock markets in mid January this year, most brokerages recommended that investor should buy stocks as the worst was over. Clearly, the worst was not over!! The markets have continued to fall since then.
Macquaire Research on 23 Jan 2008:
Correction provides an opportunity.
- The worst is over and we maintain our bullish stance.
- RBI will cut interest rates by 25 basis points and accelerate the fall in interest rates
- Top picks: ICICI Bank, HDFC Bank, Axis Bank, DLF Ltd.
- Fundamentals remain strong
- Underlying India story remains strong and this correction remains an ideal opportunity to enter for the long term.
Deutsche Bank on 23 Jan 2008:
Long term investors should increase their India exposure
-Surprised by the ferocity of the fall
-Long term investors should increase their India exposure
-Focus on large cap domestic plays
-Overweight: autos, private banks, capital goods, cement and media
-Underweight: IT, metals, oil and gas/petrochemicals, pharmaceuticals
CLSA on 21 Jan 2008:
India growth story not at risk
-The Indian growth story, led by an upsurge in investments and domestic consumption, remains largely intact.
-The government is likely to keep liquidity strong
-Remain buyers of our 2008 conviction picks—Bharti Airtel Ltd, Bharat Heavy Electricals Ltd, ICICI Bank Ltd, ITC Ltd and Tata Power Co. Ltd
Lehman Brothers on 23 January 2008
We expect 33% return from the market over 12 months
-The recent 20% correction in the market has brought valuations to reasonable levels
-This is not an unreasonably expensive (market) in view of growth and its relative insulation from global credit problems and the US slowdown
-The fall presents a good buying opportunity across several sectors and stocks
-The Indian market is now attractively priced
-From the current levels, the market should see a broad-based rally
Credit Suisse on 23 January 2008
Not the time to sell, even with a dire world view
-For a value investor that does not have positive views on external flows, only a Sensex fall below 13,000 would represent an entry point justified from a valuation viewpoint.
-That said, this is not the time to sell, even for those with dire views on the world economy.
-India is likely to be on a highly reflationary policy drive in the coming weeks unlike most others in the emerging world.
-The market fall has raised the chances of both interest and tax rates cut by February end
-As risk aversion rises and we see more earnings downgrades, this could easily come down to around 13,000
Morgan Stanley on 25 January 2008
Keep a close watch on earnings
-The fact that earnings appear to be well above trend, slowing macro growth due to high real rates, and the dependence on margins to sustain earnings growth given that topline growth is harder to come by
-Earnings a bit more vulnerable than at any point over the preceding four years
-Base of upward revisions is likely to be tested in the coming weeks and the growth itself could be in the low-to mid-teens
Sharekhan Ltd on 23 January 2008
A strong opportunity to buy
-Several of our stock ideas have corrected significantly and are currently available at very attractive valuations
-We view this correction as a strong opportunity to buy
ICICI Securities Ltd on 23 January 2008
The pain seems to be completely behind us
-We firmly believe that the sharp declines in stock prices are not a reflection of any significant adverse impact on fundamentals and provide a very attractive opportunity to buy
-We reiterate our Sensex target of 25,500 by December 2008
Even the large guys with their battery of analysts and experts and years of experience get the economy and markets wrong. The dominant thinking in January was that fundamentals were strong, earnings would continue to be robust and interest rates were headed down. This world view has now been turned upside down.
For most parts, the world looks nice and comfortable and keeps chugging along smoothly with few hiccups. Then one day, without notice, it gets slammed with disaster. Many days of comfort lulls us into believing that things will remain good forever. Investing seems like a walk in the park and making money from markets seems like the easiest job in the world...untill the storm sneaks upon us and destroys a lot of wealth created in the good years. As the legendary investor, Warren Buffet, said, "Speculation is most dangerous when it looks easiest". So if you have made some easy money, you should stop and think whether it is time for the tide to turn.
Things beyond our understanding do go wrong, often terribly wrong. Investors should accept the possibility of such events (they keep happening on and off) and be prepared to protect themselves when they happen. Otherwise they would be left with 40-70% or even more of their wealth destroyed, as has happened this time around.
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2 comments:
I have always known you doubts over the "experts". Guess this supports your doubts. I wonder what is the basis of such predictions - 25000 Sensex by Dec 2008. Just unsure i am sure they are using some logic.
I do not have anything against experts, simply that there are much fewer true experts than what is projected.
We humans have our frailities.
-We have limited ability to completely comprehend a complex social process like the markets
-We have limited ability to assimilate information
-We get biased
-We bring in emotions into the investing process.
It is wise to understand that we have very limited understanding and that that we can go wrong. Hence it is wise to invest with risk control (minimise risk when things go wrong) and have a backup plan: to deploy it when our main plan fails.
Most people and so called experts operate without any risk control. So when disaster strikes, they lose 40-80% of their money, sometimes even more. I know someone who has lost more than 80% of his money by (1) not deploying risk control and (2) by buying a falling market.
Investing without risk control is like driving through town without obeying traffic lights. You might get away with it, but sooner or later you are bound to meet with an accident.
Most of us do not have the abilities of Warren Buffet, but we operate like him anyways...and then wonder why he keeps making billions and we suffer losses. The truth is that Buffet waits patiently when the roads are totally deserted, so that a chance of an accident is almost absent.
Sensex 25000 by Dec 2008 end and such predictions are based on highly optimistic views...
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