Prajna Capital - An Investment Guide

It is all about balancing growth and inflation. Like the Finance Minister said recently, " Inflation-control measures like drawing excess money out of the economy and the robust GDP growth cannot go hand-in-hand ". The matter, as it stands today, is how much growth should we forego to control inflation? The Finance minister is of the opinion that the government would not mind sacrificing GDP growth to some extent for controlling inflation. Hence, the focus of domestic and global policy makers has shifted from GDP growth or recession to fighting inflation. Global phenomenon Actually, this situation was forecast many months ago. It was a problem waiting to happen when the US Fed kept cutting benchmark rates repeatedly in the last nine months. Inflation has now become one of the biggest global issues. Soaring inflation, particularly in food prices, has moved to the top of the agenda for policymakers. The European inflation rate accelerated to 3.6 percent last month, the highest ...

Some global factors that have a bearing on the domestic economy The sharp rise in oil prices was the last straw for the market that was trying to cope with lower GDP growth, higher inflation and flight of foreign institutional investor ( FII ) funds. Indeed one can wonder whether the economic scenario can get any gloomier than what it is today. Oil prices remain high It all started with the oil prices shooting up. They touched all-time highs of $145 per barrel. Crude oil prices had corrected to $100per barrel only to go back to higher levels. There are several theories attributed to this recent increase in the crude oil prices. Some say that cost of production has increased while others say that more speculative money is invested in crude for quick speculative returns. Usually, investors buy commodities such as oil as a hedge against inflation when the dollar falls. A weak dollar makes oil less expensive to investors dealing in other currencies. Hence, analysts are of the opinion that ...

It is better to plan for the long term and buy potential stocks at every fall There have been major corrections in the stock markets all over the world. All major markets have corrected significantly from their peak levels. Major indices in the domestic market - Sensex and Nifty - also saw large corrections over the last couple of months and are currently trading below their 200-day moving averages. The Sensex is at around 16,000 and the Nifty is at around 4,800 levels - more than 20 percent lower than their peak levels. The mid-cap and small-cap stocks are the worst hit in this market correction and this is reflected in the performance of mid-cap and small-cap indices. There are a series of events/factors that resulted in this global meltdown of stock markets . Here are some of the more significant factors that had a negative impact on the domestic markets. US sub-prime issue The meltdown in the markets world over triggered by the US sub-prime news is one. The meltdown worsened thank...

After stock market correction since Jan'08 there are many learnings for new/first time investors to protect their investment and minimize losses. How do you predict a fall in the markets? Tell-tale signs you need to look out for. The domestic Indian markets as well as global markets are going through a long-term bull run that started in the year 2003. We have seen many phases of rallies making new highs and consolidation thereafter in this long-term bull market. This phase of the market can be attributed to several factors including globalisation that resulted in work from abroad (outsourcing) and funds, opening up of the economy, and relative isolation of the domestic markets from the slowdown in developed markets. However, this phenomenal growth in the market has made it quite volatile. We see markets react very quickly and sharply to any news and events. Last few months were some of the most volatile months for the domestic/International markets. We have seen panic selling on t...

Some sectors that hold promise, with excise cuts in this fiscal budget making them more profitable Post-budget, some sectors look good from an investment perspective. This is by virtue of the exceptional budget allocations and provisions shown towards these sectors. The focus of the budget has been to boost consumption coupled with keeping inflation under control. The reduction in excise duty for several sectors/products will give a boost to consumption. The sectors which will benefit include education, healthcare, hotels and pharma. However, long-term investment decisions need not be a hasty reaction to the budget recommendations. The investment approach should be proactive rather than being reactive. Investors can wait for markets to stabilize before investing. Pharma This will be a sector to watch out for, as it is already a beaten down sector and there is no reason for a further downfall in this sector. Also, the budget is favorable to this sector as the FM has cut the customs duty...