MARCHING ON

The present economic boom in the world is unique. Not only most of the segments of the economies are booming together but all the major economies of the world have caught upward momentum. The boom is visible in all the sectors of industries and services.

Property prices all over the world have been booming for quite some time now. Though there were apprehensions, properties across the globe in the prime areas are highly priced and their prices refuse to come down. It is difficult to call the phenomenon as a bubble. On the back of economic boom, the major stock markets have been on high and now even the U.S. stock markets have joined the surge. Petroleum cycle is still on upswing, though there is a temporary fall in the prices. Metals are still looking up though there have been intermittent corrections. Only steel has started slowing down as probably it went up too high, too fast. It is the only major metal, which is showing concern about its short-term prospects. The bullion and diamonds have shown gains in the recent months. Gold has shown a huge rally in a very unexpected manner and it has moved toward historic high. Generally, when the US Dollar strengthens, gold falls. This time both US Dollar and gold have moved upward in tandem. On economic front, everything is looking bright across the globe. The cautious investors who booked profit at early stage of the rally are nursing their wounds.

The major markets have moved up faster than I expected. They have moved to a higher level than what was expected. Still I am a happy investor and I want to remain put on my investments. How cautious should I remain now is a big question. Currently, I am inclined to be slightly aggressive on Indian stock investments. Indian G.D.P. has grown in the region of 8% in the first half of the current financial year and that is a robust figure. It seems that the economy has gathered momentum and it is showing all round growth. The developed nations of the world have taken a note of the growing economy of India. All around the globe, there are talks about India and China. Growing population in India rings opportunity in the ears of foreign investors. The huge young population below 15 years of age makes India a very young and dynamic nation. The young workforce spells good economic prospects. It assures growing production and growing consumption as well.

On the downside, the concern about the growing population does exist. If the population is not adequately educated and skilled, it can impact the economy in a negative way. High petroleum prices are a drag on Indian economy. Slow down of reform process is a cause of concern. Resource constraint is slowing the potential growth. Agriculture in India is still largely depending on rain, which is uncertain. Till the economy is growing at a rate above 6%, the growth story of India will remain attractive to investors around the globe. The near
term prospects of the Indian economy are bright.

I am bullish on Indian stock market but Sensex level of 9000 is not low. It may be justified by current price earning ratio; but it is not cheap. I would like to invest around Sensex level of 8300 to 8500 and sell at the level of 9200 to 9400. Long-term investors can invest in stock in small lots or take a mutual fund route for equity investment. I would like to gradually increase my exposure to debts and specially to fixed maturity plans of mutual funds with a duration of about 1 to 2 years. As of now I would add to my fixed deposits a small amount on regular basis.

I would prefer to get out of gold as the rally has gone beyond my expectations. Still some advisers are advocating higher gold prices in a long run. I may not invest in properties now unless I can give them on rent. I advise to hold foreign currency assets in US Dollar. The currency may remain strong for the time being. I will be bullish on Indian rupee if the oil slips below 55 $ barrel. I am looking at current investment climate with cautious optimism. My concern is that as all the markets have boomed together in the last few years, when the slowdown starts at the end of this boom, it can be severe and fast as compared to what is expected.

Recently, I had an opportunity to visit Argentina. The country has mainly people of Spanish and Italian origin. The major language is Spanish. The country is large and the population is moderate. 1/4th of the population stays in and around Buenos Aires, which is the biggest city. Considering the stories of economic debacle of the country read just a few years back, I was very curious about its current economic state of affairs. Though the economic debacle is recent, I did not find any traces of economic problems around. The civil infrastructure is looking fairly good. Housing is adequate. Markets are booming and people seem to be happy. The scars of economic problem seem to have been left behind.

The countryside of Buenos Aires was also looking prosperous. The farm sizes are large and each one is big enough to accommodate a whole Indian village. The cattle are plenty. The houses are well constructed and the people are well dressed.

This picture was much better than what was expected by me. When I discussed the recovery with some local economic experts, I realised that the turnaround has come very fast. Though Argentina is very vast country, major population stays in and around Buenos Aires. This area is part of Pampas, which is very productive flat land. It is very suitable for food grains such as wheat and maize. Argentina has surplus of grains, meat, leather and wool. It has substantial hydrocarbon resources, which makes its exporter of petroleum products. The country was on the brink of economic collapse due to poor management of economy in spite of having great natural resources and small population. In the crisis time IMF stepped in to support. It advanced more than 10 billion US dollar directly and through other agency to restore harmony in foreign trade of Argentina. Spending of foreign currency was disciplined. The currency, Peso was restructured. Now Peso is strong and equal to about 16 Indian rupees. The economy is back on track. Business is booming. The increased oil prices have given additional support. The crisis is history now and the people wow that it will not happen again.