Stock Markets - Where do we go from here?

Indian equity markets, following the global downtrend, are down around 50% from its peak made in Jan 2008. According to the technical analyst, its very rare that a peak retracement goes beyond 50% historically. However, this time, the global fundamentals are still shaky. Even in India, this month's IIP numbers show a minuscule 1.3% growth, and there are talks going around about credit freeze percolating to India too (call rates shooting to 24% is an indicator)

One biggest strength we can rely on is our Reserve Bank of India. They have shown to be always ahead of the curve, and have been conservative in their management of the monetary policies. It is this conservatism that is going to help us in these times.

Another point, which I see is not talked about so much on the internet where most of the mind share has been taken away by the credit crisis is the rapid depreciation of the rupee. This is going to impact those big corporates who have borrowings in foreign currencies through FCCBs etc. They now have to pay more rupees to convert to the $ repayment amount. We will see the impact of these on the financials soon.

Crude is down, so it is going to ease inflation fears

Another biggest joker in the pack is the upcoming general elections in India. We can ill-afford uncertainty at the top in these times. And if the elections throw up a hung verdict, heavens bless us.

What I am doing:

Using up small amount of gunpowder (cash) every week to deploy it in the markets, but given the high level of uncertainty at individual stock level, I am focusing more on mutual funds to achieve diversification.

Elections should throw up even more cheaper investment opportunities