BENEFIT OF MARKET FROM WAR...NIFTY Opportunity

 You create war asset prices fall. You create synthetic inflation and the world becomes expensive. You create asset bubbles and now suddenly everything is on street. The Russian war may end but the crude prices will not cool off so easily. Yes mark my words and make note of the same. The sanctions whatever you impose will create more inflation and there will be a scarcity of products.  Diplomatically the U.S is strong but reflects weakness, china on the other hand is awaiting exporting opportunities and emerging economies are the ones who will be suffering the pain.

 The biggest boon of the war is that all Equity valuations have come down and stocks are becoming under BIG Billion day Sale offer Tag now. Those who said that markets are overvalued, overstretched and always busy in timing well don’t expect them to become investors now since they belong from that domicile only.  This war will now force many economies to increase more on war abilities which will drive manufacturing abilities and will attract inflows into the bonds for these types of manufacturing. Nifty might break more and might come down to 15000 or  14000 levels even depending upon the length of the conflict and on the sanctions based projections and cut down in outlooks.  But there is nothing to panic. It is a buying opportunity for the market.

Foreign broking houses will come up with GDP cut downs and stories of slowdown so that their institutional clients can buy when you sell out of fear. Well, the same group will raise the bar of buying when their clients have already built the exposure. 

In Russia, the costs of the conflict are estimated to be in the tune of 1% of GDP, primarily on account of increased investment risks. GDP growths will fall and hard-earned forex reserves will deplete faster for emerging economies which will create currency and bond volatility. European assets are significantly going to face massive losses which are having exposure in Russia. Restrictions like travel, tourism, freezing of assets and stringent checks on cross country transactions and trade will get into place followed by actions for G7, OECD etc. These might turn out to be an opportunity for emerging countries but crude is the secret weapon to will those opportunities for countries like India.  Faster depletion of Forex reserves needs no clarifications.

Europe is already battling with high inflation and now energy cost and other commodities across the globe will become expensive. The poor will suffer and the consumption will take a hit. The emerging economies' weaknesses will create more problems for offshore investments. Russia accounts for 40% of EU imports of natural gas, and about 30% of its crude imports. Energy prices will drive people crazy. Underinvestment in crude and also in the alternative is the major issue now and now the topping on ice is the war.  Sanctions on Russia will also be strategically designed so that the countries that are imposing the same are benefitted at the cost of high inflation.

The Fed rate hike might take a setback and may get delayed.  One of the probable reasons for FII’s selling is due to the anticipation of high energy cost and also inflation getting shot out of hand which creates massive problems for adjustment. We have seen that Annual yields on rouble-denominated debt skyrocketed above 200% last time and the history might repeat.  

 The journey from cheap to cheapest now depends on how long the battel and sanctions are imposed. The media will flood with growth opportunities identification steps. Investor behavioural change is the most important aspect to be identified at these times. Few investors will be scared to invest, but the truth is that they are basically always scared and make others nervous too.  Few investors are always busy timing the market and in the end, they did not invest at Sensex 45000 levels and not at 60000 levels. Other segments of investors are still busy timing the market and they only give 80% effort in timing and rest in execution.

Many of these investors will pretend to become analysts for a short period of time. Now the strangest part is that all these investors the ones who will do investment will never tell the other investor to invest.    Arbitrage options followed by hedging will play a big role in portfolio management.    Stay invested and avoid rumours.  Focus on your portfolio advantage and don't copy paste someone else risk profile. Invest with vision and please don't try to become a Fund Manager. Remember Cheap might become cheapest.  Follow your rules of asset allocation and don't time the market and most importantly  before giving advice on investments to others get your investments executed.