Financial Daily from THE HINDU group of publications
Tuesday, Jun 13, 2006
Financial Daily from THE HINDU group of publications Tuesday, Jun 13, 2006 |
|
|
|
|
|
|
|
|
|
|
Home Page
-
Stock Markets Markets - Outlook Deeptha Rajkumar
MR MARC FABER
Mumbai , June 12 Is it time to take a holiday! For that is what investment guru Dr Marc Faber has advised asset markets such as India in his recent market comment. To quote him — "Some asset markets like India, Russia, the Latin American stock markets, copper, and other industrial commodities, are so over-extended that further 30 per cent declines would not surprise me. Therefore, my advice is to sell rallies in stocks and commodities and take a holiday until next October. This would particularly apply for the Indian stock market, where speculators are mostly heavily long," Dr Faber said in his recent commentary. However closer home, market participants, while conceding that the correction was overdue, maintain that parameters required to judge Indian markets are different. "The difference in business is so dramatic, the growth profits are so different. One cannot draw parallels," said the head of leading domestic brokerage. Though not convinced about `taking a holiday until next October,' marketmen refused to be pegged down on the possible duration of a bear market phase. Their logic being, the markets had gone so high, it was bound to correct. "Our equity markets have already seen a 30 per cent correction. Not only was it unpredictable but even the severity was unexpected. The sharpness of the fall was largely due to leveraged positions," said the head of a leading domestic broking house. In his recent commentaries, Dr Faber had emphasised that all asset markets, such as stocks and commodities, were significantly over-bought and that a meaningful correction would follow. Moreover, it was his view that technically, equity markets looked vulnerable and that some commodity markets — notably copper — had risen in a speculative blow-off. While there is no denying that the Indian markets were not impervious to the global commodity meltdown, industry watchdogs aver that non-ferrous stocks are not unattractive yet. Their advice being, stay invested in commodity stocks. "The hardening of interest rates has taken out the speculative froth. The weakening in base metal prices has been more than discounted. In fact, it is healthy for the industry if prices remain at a level, as soaring prices could lead to a shift in demand," said a commodity analyst.
Base metals may soften
While steel should continue to rule firm, one can expect a softening in base metal prices, though it would be difficult to quantify the degree of weakness one may see. "The capacity build-up can bring about some softening in prices," said an analyst. However, experts maintain that globally the base metal sector is under invested and there would be a definite lag of 2-3 years between investment and output. "Warehoused stocks at LME and Shanghai are closely watched by investors. To decide stock to use ratio, currently investing levels at these two exchanges are rather low because of draw down of stocks following price rise. That creates an upside for market," said a commodity expert. The acceleration in industrial activity in India (real estate, construction, power generation) apart, industry sources do not believe the China story is fully played out. "Though one is expecting a marginal slowdown, the GDP growth and manufacturing growth in China is quite substantial. "The overall demand for steel, copper and so on will rise," said an industry source. While GDP growth of China stood at 9.9 per cent in 2005, it is pegged at around 9.6 per cent for 2006. Manufacturing growth (China) for 2006 has been pegged at 15-16 per cent. Commenting on the likelihood that we have built some kind of bubble, not only in copper but all industrial commodities, sources said that the demand/supply fundamentals never justified such high levels. "It is no bubble. The demand is very real".
More Stories on : Stock Markets | Outlook | Metals
Article E-Mail :: Comment :: Syndication :: Printer Friendly Page
|
Stories in this Section |
|
The Hindu Group: Home | About Us | Copyright | Archives | Contacts | Subscription Group Sites: The Hindu | Business Line | Sportstar | Frontline | The Hindu eBooks | The Hindu Images | Home |
Copyright © 2006, The
Hindu Business Line. Republication or redissemination of the contents of
this screen are expressly prohibited without the written consent of
The Hindu Business Line
|
