How Long NIFTY-Sensex -Dow Will fall?

The fall of the market will happen more. You don’t know how long the fall will happen. You don’t know how much we need or liquidity is required when revenue is zero. You need money for provision; you need money for paying your fixed cost. You need money to keep in your locker for this emergency time.  Those who waited for a price correction, valuation gap reduction with price have been blessed mercilessly. Cheap has now become cheapest and is now search for another word to match the fall.  The depth of the fall is much merciless that most political leaders will now find to reconstruct the whole economy and business to be a nightmare.

Buying is not important but selling is more. High yield asset is being sold to have liquidity. Selling asset in one country to get the liquidity back at home is now the only objective. As an investor when FANG stock price has come down and more price and valuation are going to come down then why one will keep investments in emerging economies. It’s now the competition of cheap market to invest rather than chasing valuation. Valuations have come down and will come down further but will when U.S or EU is available cheaply why I should turn my face towards emerging markets. Every market is now cheap and hence the battle to pull money is going to be fierce. Sell even the safe asset since liquidity itself is the safe assets.

Its only time to sell and this sell will continue depending upon the need for liquidity at home. Fixed cost need to be paid and honoured. Salaries, rent, administrative expense all need to be honoured irrespective of sales or revenue. Lockdown is for the citizens but not for the fixed cost. Lengthy lockdown will attract more liquidity as the uncertainty of getting back on feet is restricted.

Analyst community, on the other hand, is just busy on giving response on real-time about very shut down, every manufacturing halt and every loss of revenue and consumption. They are not waiting for data which will come after a month. Financial models are smart enough to predict the loss and reflect the same on markets.

For the global Fund Managers, the game and art of chasing alpha have now become easier as sell-off has led to an oversold market level. Alpha is no longer in the competition but who will come back to buy again and when is the key question.

The fall of the Indian market and global market has led to a significant blow to every class of investor. The 1st free-fall lead to a massive loss but the same is now being recovered through a short sale. This is another weapon through which investor earn money when others cry for the loss.

Financial security, job security are creating panic and hence sell-off is inevitable. Most of us even don’t know how many companies are wipes from the global map. Consumption is now a pause and restarting will need time –which the world doesn’t have right now.

SME sector is highly impacted. How many will get back on the street is a matter of question?  Many SMEs might not come back to the streets again. Unemployment fear is another powerful fear to sell and sell everything.

Start-up business model will be the biggest sellers and suffers. Loss-making business models and pulling liquidity for super return is now to get speed brake. When Fortune 500 companies are available at cheap then why one should search for Alpha in some other asset class. Unlisted share space will be battered. All the planned money-raising activity through various modes and particularly through IPO are all lost now.  These money-raising plans are now a distant dream.

The journey of cheap valuation is not yet over. In the coming weeks, 1st Quarter results of Global markets and India 4th Quarter results will come. Well results are discounted and factored in or few are left to be factored but the more important will be to know the guidance of these companies which will show the future. Bleak outlook followed with a longer horizon of revival will lead to mixed reaction on the markets.

After the impact of the Covid 19 is more fearful since we are yet to think about the same. One of the biggest markets is real estate across the globe.

U.S housing market and the global housing market will spook another massive problem once the Covid 19 comedown. Major economic activities are linked to the housing sector. Defaults and NPA will rise and the slowdown will impact the ancillary industries. The US housing market will now hardly get any buyer as loss of job and uncertainty about paycheck delays every decision making.

Well, the whole article will sound like a parody of negative but truth is now more bitter than the word bitter itself.

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Market-Journey from Cheap to Most Cheapest and yet to Go

Every investor is under tow question 1) is this the right time to buy as stocks are cheap and 2) when the markets will be back to an all-time high. Markets and its levels are unpredictable. I heard a lot of fund managers and concall and all of them said it is cheap to invest and the best time to build long term portfolio. 

  My point of analysis being an economist and business strategist is we need to look beyond the Covid 19. Yes, when we look beyond we get ready for choppy and more uncertain things. The article is divided on economic and market hence one will get a gamut idea about the outlook.

In the below analysis I find that we are back to 2008 and another decade of revving and building the world economy has come up. It might look easy but I am very much sorry to say it will be tougher since major weapons have already been fired.

Today I don’t have much analysis to do but hold many questions bubbling in mind and the question are raised to all of you. LOCKDOWN and GDP are both linked to each other. The covid 19 impacts on global GDP is going to create a new history of Economic Slowdown which might break the record of several 1929. The history of recession will be rewritten and the major problem is that the global economy has lost all its mass weapon of injecting liquidity. Now the last resort of direct transfer of money has come into place. The problem is not for working from home but for all those people who are Day Wage Earners doing no skilled work or don’t have the work which belongs to the category of the Work from Home.

My 1st point is that it is now well clear that 1st Quarter if CY02020 is gone with slow down but it seems that 2nd Quarter will be gone. The lockdown during this time will make living difficult for the unskilled jobholders. Well how long the World leader will keep transferring money directly to these accounts? If the lockdown continues for full of April and then spill over to May 2020 then how much billion or trillion will be required to transfer directly?

Question 1

The immediate question which comes in mind is why Lockdown will continue till April and May. This data itself will speak more why the lockdown will continue. This same data will spook the thought of how much lockdown is required. As per the World Health Organization notes that while it required three months to reach 100,000 cases, it took only 12 days to hit another 100,000.

During this crisis when there is zero revenue and business is in doldrums and people will not be having any money to buy things. Income inequality will grow and people will be saving more to save for any unforeseen event. This particular phase will create a ripple effect on the global economy. EU as a whole has been in doldrums since 2008 and its austerity measures crippled the economic growth

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Question 2

Now with massive stimulus coming out from the pockets of the EU do we think that in the coming years EU will be struggling more and more austerity measures will be coming up? How the citizens of the EU are prepared for the same. How many countries will be joining in the default category in the coming years just like Greece and Athens came up in the last decade?

Question 3

Corporate Debt will grow since zero interest rate is something different and repayment of debt is something different. If every central bank and government will be giving so much liquidity then the next question comes from where they will earn to balance the CAD and Fiscal condition. The corporate bond market will be witnessing nightmare once the dust settles. We have to build a business and we have to get trade back on track. The global economy cannot afford to have another Trade war and cannot afford to have Big Banks to fail.

We must not forget that Individual workers and their families — many only recently recovered from the economic cataclysm of 2008 and 2009 are already feeling the effects. The unexpected economic shock has put millions of Americans living on the precipice of ruin. In a Fed survey last year, 39% of Americans said they would be unable to handle an unexpected $400 expense. The recovery was just in the process before the bell rang for the collapse.

Coming back to investment and yes to my home country India everyone is looking for a cheaper price avaliable. The concept of cheap needs clarification. As I said earlier that What seems cheap today is cheaper tomorrow and cheapest on the next day. This is what will happen and will continue. Believing on this statement what many investors did that when markets came down to below 10000 they invested and when it came below 9000 they invested and when 8000 was broken they invested the rest. So the journey of cheap to cheapest is covered but now IF it will fall below 7500 then what will that investor do? Stay Long term the blindest statement for an investor who deployed all his savings to make quick gain based on the statement of the cheap offer available in the market. Deep Discount Like Flipkart, Amazon were some of the statement circulated and said by every market player. These idiots forgot that they are comparing investments with physical assets.

Question 4

 The way the global markets have fallen any investor –particularly international investor will be looking for US or EU market to invest and then will turn towards Indian or Emerging markets. Secondly, they need money at home during this crisis and we all don’t know how long the capital will be required and what further cost or expenses will arise in their own home country. Hence international investors investment is waiting and watches mode. Now in this context what is the definition of Cheap? What should I be mentally ready if I Invest? What Should I Expect?

The irony of life is that now Indian markets will attract 1st-time investors who are another set of blind people who hardly knows anything about investment. I have personally come across people who don’t know the difference of Demat account and trading account. These people will now burn their fingers taking a call on cheap and cheapest. Continued to Part 2.

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