about 4 months ago
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Good news and bad news.

First the bad news - the markets are falling as though there is no bottom.

Good news – retail investors have been calling us incessantly, asking us what to buy in this falling market.

So, even though there are war clouds on the horizon, the mood among the retail investors is optimistic – they are looking at the current situation as a blip and expect that in the end, like always, sab theek ho jayega. The long-term story is intact so they are not worried about the short term – its being looked upon more as an opportunity.

But should we be worried?

The die-hard pessimists are calling this the beginning of the World War III because if diplomatic moves do not work, then we could see USA, UK, Japan, India, Australia lined up on one side and the other side will have China, Russia, Iran, Pakistan and the rest. If at all the face-off comes to that, which seems highly unlikely, the world will get into a turmoil all over again. But then a full blown WWIII situation is really a very harsh and unlikely picture – it’s the worse case scenario.

The market is spooked not because it fears a WWIII but because of economic disruptions that could impact if sanctions are imposed. But more than anything else, the immediate worry is that if Russia is pushed to the corner, the first thing that it will do is turn down gas and oil supplied which will in turn lead to a full blown energy crisis. The ongoing threats of this war have already pushed up oil prices by 14% on one month; it is ruling around $95/barrel and if the situation is not resolved, oil could hit $125/barrel.

The worry is also on the LNG or gas front. The problem is that if sanctions on Russia are imposed, gas prices will shoot through the roof and for India, it will mean an increase in price of so many things we manufacture to electricity and fertilisers.

The truth is that India can only stand-by and watch with no influence on the situation but if the crisis is not resolved through diplomatic means, we will be impacted by strategic and economic consequences. India is a friend to all the three – Russia, USA and EU; hopefully we will not be forced to take sides.

This could be brinkmanship politics but an all-out war needs to be prevented. US Intel is talking about Wednesday being the ‘strike’ day so expect markets to be volatile till the situation is resolved. Till then every dip is a buying chance. HDFC, HDFC Bank, CG Power, Hind Copper, SCI, Adani Wilmar, Zee Ent, Bharti Airtel, TCS – all are great all-time buys.

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