Markets
BSE See NSE See 39,100.23
139.44 (0.36%)
collapse Related Readings collapse

Market Strategy - Post the USA downgrade

| 8/15/2011 3:32 PM Monday

Politics has incentives that economics cannot under-stand”, said French philosopher Blaise Pascal (the mathematician after whom we know Pascal Law’s). The current turmoil in the world economic scenario due to the downgrade of the US sovereign, which raises fears of a double-dip recession, stands testimony to that.

When the US government decided to raise its debt ceiling after waiting until the eleventh hour, instead of cheering the decision, the markets actually gave it a thumbs-down. The reason that is being bandied about is that the road map prepared by the US for its fiscal consolidation falls short of what would be necessary to stabilise the government’s debt, which touched a level of USD 14.30 trillion. This led to the downgrading of the US sovereign rating by Standard & Poor’s (S&P) from ‘AAA’ to ‘AA+’ and consequently triggered mayhem in the world equity market. Since then, it has been quite a difficult time for investors globally. It looks like the bears have drawn their claws out, and are in no mood to spare anyone. At least, this is what the decline witnessed by global equity indices in the last one week indicates, and India is no exception to that.

To quantify this and put the numbers in perspective, since the beginning of August 2011, the Dow Jones Industrial Average (DJIA) has declined by 11%, the S&P by 13%, the HangSeng by 10%, the Nikkei by nine% and the Shanghai by seven%. During the same period, India’s leading equity indices, the Sensex and the Nifty, also witnessed a decline of eight%. The impact is clearly seen in the advance decline ratio too. Since August 4, there have been seven declines on the BSE, against one advance. The story is no different on a year to date (YTD) basis, and there is hardly any global market that is providing positive returns. In fact, India is the worst-performing market in the Asia-Pacific region, on YTD basis.

It is obvious that when the going gets bad, there are more questions than answers. Many investors have seen their hard-earned money vanish into thin air. Hence, the questions are looming large. What will the exact impact of the downgrade be? Where is the bottom? How much more pain must investors suffer? From what levels will the market bounce back? These are the questions that are playing on the minds of the Indian investors, which have not received answers yet. The investors are now nervously waiting and watching from the sidelines.  As always, DSIJ tries to answer the queries that are clouding investors’ minds, to help them make their strategy during these confusing times.

What Triggered The Meltdown?

Let us first understand what has happened and why. S&P has down-graded the US sovereign rating from ‘AAA’ to ‘AA+’. The reasons cited for the downgrade are as follows. The first is the US fiscal consolidation plan, which falls short of what would be necessary to stabilise medium-term debt dynamics. Secondly, it mentioned that US governance and policy making has become less stable, less effective and less predictable. The worst part is that S&P has further stated that they could lower the long-term rating to ‘AA’ within the next two years, if that the country sees lesser reduction in spending than agreed upon, higher interest rates or new fiscal pressures.

 

Find More Articles on: DSIJ Magazine, Cover Story, Research, Articles, Markets, Market Outlook, Product, Large Cap

«« First « Previous |1 2 3 4 5 | Last ››
news letter

More for the early bird.

Get the post-market reports and breakfast news right in your inbox. See latest »

DSIJ Mindshare

12345678910Last

Tiger Logistics topline to grow by 10%--buoyant over infra sector status to logistics sector

Tiger Logistics topline to grow by 10%--buoyant over infra sector status to logistics sector

Logistics sector will play a vital role in making the concept of ‘Make in India’ a success. This will be further aided by some of the recent steps taken by Government of India such as granting of infra sector status to logistics sector.

Best and worst Performing Sector Funds of Year 2017

Best and worst Performing Sector Funds of Year 2017

As the year-end has approached most of you are eager to know the mutual fund movers and shakers of the year 2017. Read on to find the performance of various sector dedicated funds.

Markets may start positive, but volatility likely due to F&O expiry

Markets may start positive, but volatility likely due to F&O expiry

The start of the F&O expiry day is likely to be in the green, but volatility may creep in with the progress of the session. The SGX Nifty suggests that the Nifty could open at 10,525 with gains of 32 points at the opening bell. 

Pidilite announces buyback of Rs 500 crore

Pidilite announces buyback of Rs 500 crore

The buyback offer comprises purchase of up to 50,00,000 equity shares. The buyback offer size comprises 0.975 per cent of the total paid-up equity capital of the company.

Bank Nifty drags markets to close in the red

Bank Nifty drags markets to close in the red

The late session fall in Bank Nifty changed the direction of the market, leading to a marginal fall in the benchmark indices. Bank Nifty yet again resisted at its multiple point downward sloping trendline level at 25733.

Six major underperforming MF schemes having higher expense ratios

Six major underperforming MF schemes having higher expense ratios

Mutual funds with a large size of assets under management (AUMs) are supposed to have lower expense ratios. However, there are schemes with large AUMs but having higher expense ratios and generating lower returns. 

Nifty Pharma supports market; Sun Pharma at bullish reversal

Nifty Pharma supports market; Sun Pharma at bullish reversal

Nifty Pharma index has come in as the healer in an otherwise sluggish market. Index has given a consolidation breakout at the 9420 level today and if the it sustains 9420, followed by 9628 on the upside, it has a long way to go.

Ten stocks close to their 52-week low

Ten stocks close to their 52-week low

Following stocks are close to their 52-week low as at 12.35 p.m. on December 27.

Ten stocks close to their 52-week high

Ten stocks close to their 52-week high

The markets on December 27 opened gap down. BSE Sensex is trading at 34,068.15, up by 57.54 points and the Nifty is trading at 10,539.45, up by 7.95 points.

Five stocks with selling interest

Five stocks with selling interest

Overall volumes in futures & options currently stand at 62.75 lakh contracts with a turnover of Rs. 5,19,204.72 crore.