August 04, 2024   |   Read Online

• US markets tumbled on news of potential rate cuts and poor unemployment data signifying a weaker economic situation

• Worries on Israel and Iranian geopolitical tensions have increased substantially

• Indian markets are off all-time highs

• Berkshire Hathway sold almost 50% of its Apple holdings to increase their cash holdings

• We feel a much-needed correction could be finally on the cards which might pull Nifty back by 5-10% and potentially more if global geopolitical issues escalate

• Our yearbook back in December had suggested a target of between 24k and 26k for the Nifty before Diwali ( Our communication to our users below on how to play this situation)

• Next big levels to watch out is 16,000 on the Nasdaq and 24k and 22.5k on the Nifty

Q. How to play the markets in the context of the global sell off?

Answer

The Nifty had breached 25k levels, in line with our Annual Yearbook where we had stuck our neck out for a Nifty level of 24k - 26k and we are mid-way on that recommendation

Liquidity continues to fire the markets and we need big triggers that could come only in the form of

a) Domestic political uncertainty
b) Global geopolitical stress
c) Worries around the US economy or political scenario

Unlike popular perception, we believe declining rates aren't positive for markets structurally. Rate declines indicate that the central bank has to rely on monetary measures to pump up the economy.

Quarterly results thus far have been a tad below expectations.

All these factors could lead to a decline in equities over the next few weeks/months.

We advise caution at these levels despite being structurally bullish for the next 2 years.

Invest lumpsums only if your asset allocation (I.e. if your equity allocation to more than 5 year goals) is < 50%

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