We are in a long term bull cycle, true, but life gives a twist when one least expects it. So, what could be the worrying factors to heed for investors:
Middle east flash point: Ever since the terrorists attacked Israel and killed a large number of people and took hostages in large numbers, the world has been holding it’s breath. The investing cosmos is of course on tenterhooks and awaiting signals from any side that could be interpreted as positive in the middle of a lot of doomsday crystal ball gazers.
Fareed Zakaria, in an interview said very famously that “we are in a moment of maximum danger”. Let us not paint rosy pictures over this rather difficult situation. This indeed is a flashpoint with possible dire global ramifications. The oil supplies going to the world from this region is substantial: the shipping routes that pass here are amongst the busiest and is a lifeline for global trade. Oil prices could go up substantially all over the world, shipping freight costs could again be on an upswing and interest cover could also once again become prohibitive. All these will add to the cost of manufacturing which will decrease profitability and thereby make stocks expensive. And could lead to a sell signal. But I consider these minor problems. What is bigger is that the super powers could align themselves along their allies and train their rockets at their opponents who are not even in the geography leading to escalated “war” situations around the world.
Is India expensive? It definitely is. And there are many markets around the globe that are available at much cheaper valuations – be it in terms of PE or PB or even indexing growth rates into both. China it seems has already tired of low valuations for the last two years and is very keen that the distance between China and India in the Morgan Stanley Emerging Markets Index remain significant and there is greater foreign eyeballs in the “Chinese Asset Class”.
Has the time come for time correction? Time correction of prices is amongst the most pain free way that the markets correct. It simply means that the prices remain where they are for a long period so effectively the investors don’t lose value but per annum percentages change for the better. For example if the markets stay at 25,000 (Nifty 50) over the next year or more, no one loses anything on an absolute basis. However, since the denominator is growing whilst the numerator is static, the resultant is a lower percentage return. The sideways movement could definitely indicate that there is substantial possibility of the same.
Is gold an alternative for investable surplus? Investors look at profit possibility from asset classes, be they stocks, bonds, metals, real estate, what have you. In the last many years I have not seen a buzz around the golden metal as much as I am seeing now. Consider this: Gold from 2011 till sometime back was at the same price in the global markets – roughly at 2000 USD per ounce. However, the growth og gold prices over the last year have been nothing short of amazing. It has increased by a whopping 28% since the beginning of the year and it is by no means a spent force. This draws investible money away from equity leaving lesser reasons for the markets to go up.
Is debt neglected for long: Debt for the investor was a “dead instrument”. If money could be made so predictably and in such an easy manner why would anyone choose anything else to invest in! But with a limited upside to stocks visible now and with substantial volatility, interest has been seen to be rising for debt. And this is Marked to Market debt where lowering interest rates provide higher prices for the security. Already there is a buzz in the air for long tenure debt papers. And this again draws money away from stocks which again limits its upside which again lengthens the cycle.
I have been cautious for a while now and advocate the same.

Very well written and summarised, covering a good aspect of domestic as well as global developments. Are we not expecting little poor results of corporates for September quarter ?
After all the fight with me you are writing this 😳🙄