Raining Gold !!!

In a fast-track world like ours where everything travels at the speed of light , it comes as no brainer that the mood of despair and despondency spreads like epidemic quite instantly thro’ markets . Indian markets , esp the Rupee , is under one such panic attack at the moment . No level is sacrosanct when it has been hijacked by the market panic triggered by crowded (herd) trade . The debate is not so much about whether the fundamentals have deteriorated for India as much about excessive pessimism the market is pricing in .

At some point of time , cacophony around Rupee will subside and markets will regain its sanity . Not very long ago , Euro was under similar attack and the markets were writing obituary for Euro as a single currency . It brought Euro down from 1.4 levels to less than 1.13 against the dollar on fears of EU break down . Six months down , Euro was back with vengeance to 1.33/34 . It was not that the fundamentals had improved dramatically for Euro region , it was just the unwinding of crowded trade in the market that caused this bounce. On the same breath , it is equally likely that Rupee will see a similar turn , though timing of such a turn is unpredictable . Never forget the fact that the data points emerging from US is at best mixed in terms of not so encouraging consumer spend and consumer confidence . This could put Fed tapering plan at risk . Already there are downward revisions to Q3 US GDP forecasts . Further , recent RBI measures like forex swap window for oil companies , interventions in the open spot market etc have been reasonably effective as reflected by smart pullback in Rupee to 65.70 ( closing as on 30th Aug) from its all time low of 68.80 . Needless to say , punters pressing shorts gleefully on Rupee can only ignore these developments at their own peril .

Opportunities emerge when there is a huge disconnect between what the market is pricing in and what the reality is . Stock prices in the broader market ( mid and small cap in particular) is so distressed that the market is pricing in “end-of-India” on fear of free fall in Rupee . Wise investors understand that tide does turn eventually and when it turns , mis-pricing gets adjusted quickly , thus rewarding them handsomely .

Couple of quotes from leading voices can be soothing in these manic times . In an interview to ET , US food giant Cargill’s Vice Chairman Paul D Conway says he is not perturbed by the tumbling rupee just as he wasn’t too revved up by the “Incredible India” slogan when things were better . Echoing similar sentiment , World Bank Chief Economist Kaushik Basu says that “India looks much better from Washington than from Delhi” .

More importantly , when India starts looking better from Delhi , asset prices won’t be as cheap as now . Time to invest is when drums are beating , not when the trumpets are blaring.!!!

 Happy Value Investing !!!

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