As the possibility of a Fed action in Dec becomes more probable , how will this affect the emerging markets in general and Indian equity market in particular.
One thing that looks inevitable is the weakening of the Indian rupee . For rupee the best case scenario is 65 and worst case can be as high as 70 by March 2016. Thus the downside risk is much higher than the upside potential.
But Oil prices will save the day for Indian imports. As the global Oil supply increases and demand stagnates, we may see further fall in Oil prices .
India being a net importer of Oil will benefit in this scenario . The price of other commodities like Coal ( of which Indian is a big importer ) has also come down drastically .
Thus in the long term the soft commodity prices will more than negate the effect of a weak rupee .
However as Dec comes , we can expect hot money to flow out of emerging markets . This will create a life time opportunity for investors in Indian equity .
The psychological problems for investors and traders are many . Its very boring to say that there is nothing to buy or sell today . Its boring to say ‘ The market is expected to correct . So hold your cash and wait for the right opportunity . ‘
But we have to learn from the masters of Investment . We have to understand what makes them great .
The point to ponder on :
Buffett was never averse to putting his eggs in one basket .At one point he had 65 pct of his worth in GEICO and at some other point he had 40 pct of his wealth in Amex.