Tuesday, July 13, 2010

Greed in the India Equity Markets

Infosys reported earnings that missed estimates today.  In addition the industrial production numbers came in at around 11% while the market and analysts were expecting 15%.

Other signs are also beginning to appear that the Indian economy is slowing down.  Obviously this is a case of glass half full or half empty.  The Indian stock market has avoided the doldrums faced by U.S., European and Chinese markets and has performed relatively better compared to these markets.

However, I see today's news out of Infosys as a sign that we are witnessing the exporting of a crisis as we have in the past.  In addition, BMW Audi and other German exporters are hiring due to an unexpected rise in demand.  This is exactly what was forecast to happen, the Europeans are exporting their recession to the Asian countries.

The Indian export model cannot survive a 20% devaluation of the Euro relative to the local currency.  The Indian economy has already started decelerating.  It is only a matter of time before the stock market acknowledges this.

The market can remain oblivious to bad news for longer than your account can stay liquid.  Making money in the market requires patience, or a microphone in the offices of Goldman Sachs and the Fed.

Today's Indian market is a product of greed by investors that are jumping back in (capitulating) as they see 18000 on the index and fear being left out.  Investing based on greed and fear usually results in losses. This time will be no different.  Now is not the time to be investing in equities.

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