Friday, May 15, 2009

Huge Fiscal stimulus packages from countries across the globe, size ranging ranging from 5% to 25% of the GDP.

CASE FOR EQUITIES:

  1. Huge Fiscal stimulus packages from countries across the globe, size ranging ranging from 5% to 25% of the GDP.
  2. Risk free Interest Rates across the world are at historical lows: 0.125% in US and 4% in INDIA.
  3. Global risk appetite is improving.
  4. The spreads between Government and Corporate Bonds have come down.
  5. The stock market volatility is at the much lower level than the last year.
  6. Commodity prices have bottomed and are looking up now
  7. The Inventory levels with corporates is at lowest levels
  8. Better than expected results from the stress test of US banks
  9. World economy is showing signs of stability
  10. Domestic consumption would pave way for a recovery as is evident from increase in cement dispatches, auto volumes and wireless subscribers numbers.
  11. India among the fastest growing economies in the world, next only to China.
  12. Substantial FII inflows into India in April and May 09 for the  first since April '08
  13. The season of downgrade of corporate earnings is over, and upgrades have started happening.
  14. Corporate results so far have been better than expected. Banking sector is leading the charge.
  15. Market valuation is below the long term average valuations.
  16. The earning yield of equity is much higher than the bond yield, rather the difference is at all historical high.
  17. A lot of equity money is sitting on the sidelines, which should get back into equities post elections.
  18. The global demand is stabilizing and the confidence has started resurfacing
  19. Whatever Government comes in,  a large government spending is inevitable.

Risks

    1. Non formation of Government post elections.
    2. Monsoons.
    3. Oil breeching $ 70


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