The Sensex is down 3.5% this week! It got spooked by the scanty rains. Should we worry a great deal? I am not so sure. Should we worry at all? YES. Whatever said an done in Indian are scared about high food prices. A really bad monsoon will make food prices shoot up further. Inflation will rise again and govt. in trying to please the Mango people ( aam aadmi) will go after profit making sectors in the industry. Can the Sensex ignore this and keep rising ? sure it can but I would dread such a rise. I would rather the Sensex correct to levels below 14K now and then price in all the negative factors and then rise. If the opposite happens and Sensex breaches 17K the next correction could be really deep, as deep as 20-25% (taking 17K as the base for calculation). A decent correction from the current levels is not so bad. People who had invested around oct-nov ‘2009 have doubled their money. Losing a little bit of the profit should not hurt too much. Also 13-16K is a great trading range. Good traders will make good money in this range.
Important question - Will the actual economy really suffer due to a bad monsoon? Maybe not. We are a resilient lot and also bad monsoons are a part and parcel of an agrarian society. We have been fortunate to get almost 4-5 continuous years of good monsoons.
Good thing is that the whole drama will play out in the short period of august and September. Hold on to your horses and invest intelligently and you can make real good money in the next 2-3 years.
Note – My value picks are beating the Nifty by close to 60% with M & M and Tata steel surging ahead.
Wishing all a very Happy independence week!
