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Market Update: Book profits in Indian equities

Amit Goel | 05 Nov, 2014  | Follow Author | Add to my Favourites 
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Market Outlook

Global Equities: Headed for an Epic Bear Phase


Key equity indices in US have just made new all time highs after a deep correction in October. However, there is a big disconnect between S&P 500 on one hand and the NYSE Composite and Russell 2000 on the other, which remain significantly below their year to date highs. Besides this and a host of macro fundamental factors (about which we will elaborate in our subsequent newsletters), there are a host of technical indicators including the widening Junk to treasury yield spreads in US, the percentage of Bullish advisors v/s percentage of Bearish advisors and falling commodity prices which clearly betray that US equity markets are at or close to their highs and are very soon going to embark on an epic bearish phase which will take them down a long way from here.


Apart from US there is very little strength in Equity markets elsewhere, particularly in Western Europe and Latin America where we expect the equity markets to go down at a significantly higher pace than US. Isolated Equity markets like Japan and India may tend to outperform for a while but will eventually participate liberally in a full blown global downturn that is about to begin.


We recommend getting out of equities completely as an asset class to all our investors and to explore shorting possibilities as there is plenty of money to be made on the short side over next 18 months or so.


US Treasuries: Still a Good Investment


We have been shouting from our roof top for quite a while that a leveraged call on US 30 year Treasuries is the best investment in the world. A non leveraged bet at the beginning of the year has generated an annualised return of about 24% per annum in USD terms and much higher in Euro or Yen terms as Dollar index as at its highest in a long time. A leveraged bet has easily generated more than 100% annualised return this year in USD terms, given the high leverage potential on US treasuries. We still believe that there is plenty of money to be made in US 30 year Treasuries on the long side.


Gold: Last and Final Call to Buy Gold


We said last time that Gold is looking more attractive to us than at any point in last 2 years. Now that gold is at a 4 year low at USD 1170 per troy ounce, we believe that gold is one of the best value investments with a 3-4 year horizon. Gold will easily cross USD 3,000 per troy ounce over this period. One can start buying immediately and can complete the planned quota over next two weeks.


Indian Equities: Book Profits


Since we foresee a huge bear market to unfold globally, it is tough to be bullish on Indian Equities. Minus the global outlook, Indian equities were probably well positioned for a pre budget rally. However, it will be very difficult for Indian stocks to hold fort in the wake of a tsunami of negative news from overseas.  Hence, we recommend a complete exit from Indian Equities as well.


Indian Fixed income: Book Profits


We have been bullish on Indian Gilt and Income Funds for last many months. We believe that this is a good time to book profits and take your money back home as, there could be pressure on the INR in the bearish global context. Besides this FIIs have invested in Indian Gilts on a large scale this year and they could turn sellers resulting in higher yields. This does sound counter intuitive as the global commodities are in a free fall and will result in significantly lower inflation figures. However, we would prefer to be totally risk-off for the next 18 months and would rather make our money in gold, in US treasuries and in Equity shorts.




About Amit Goel

Amit Goel is Cofounder & Director of www.pacefin.com, a premier financial services group with a pan India presence and a global footprint. Amit specialises in Macro Economic Research and medium to long term forecasting of trends in various asset classes particularly Equities, Bonds and Commodities.


For more information please write in to [email protected]


Disclaimer: The author has taken due care and caution to compile and analyse the data. The opinions expressed above are only the views of the author, and not a recommendation to buy or sell. Neither the author nor IndiaNotes.com accept any liability whatsoever arising from the use of any of the above contents.




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