Will BRIC Nations perform well in 2010?

Russia topped the table of Countries whose stock Indices performed well in 2009. It is followed by Brazil and it is followed by India and China respectively. Russian Stock Index, Russian Trading System(RTS) appreciated by 112 percent in 2009. Brazil’s Stock Index Bovespa, appreciated by 83 percent. The Indian Stock Index Bse Sensex appreciated by 81 percent followed by China’s Shanghai Index (SSEC) by 80 percent.

What we have to take note is, China’ Index has been trading well below its all time high of 6124 and it is currently trading around 3300 level. India’s Sensex is trading around 17500, well below it all time high of 21000. Brazil Bovespa is trading around 68000, well below its all time high of 74000. Likewise, Russia’s RTS is trading around 1400, well below its high below 2400.
It is clearly visible that all these Indices are trading well below their 2008 highs indicating, that they haven’t actually grown. What they have done is, they have pared some losses. Our expectation is, will these countries stock Indices perform well in 2010 also. If so, will they cross their all time highs.


Fundamentally speaking, the companies in these countries have performed better in 2009 than 2008. But they have not performed as much as they performed for the last three years which indicates, the growth in these Stock Indices are unlikely in 2010. And also, the PE ratios of these indices are in higher side when compared to 2008.


Technically speaking, no bear market would bottom out in one year. It will take more than two years to bottom out. So, 2010 would be year of downtrends in all markets. So, 2010 would be as good as 2009 for the BRIC nations. If markets come in this year, then these nations could perform negatively this year.

Don’t be complacent in holding Investments in these countries.

Mutual Funds or Stocks?

Many Investors have doubts about whether to invest in stocks directly or in Mutual funds. If we can analyze the performance of the Mutual during the Bull Markets and Bear Markets, it would give a clear answer about it.

The present bull market started around 2003 and ended in 2008. The Mutual funds performed well during that period but still their performance lagged behind the performance of Stock Indices. In India, Bombay Stock Exchange Index Sensex appreciated by seven times. But no fund appreciated by seven times in this time. If we take into consideration some well performed sectors like, Reality, Power and Infra, the performance of the funds is far more less, which clearly indicates, Mutual funds have not performed extraordinarily. They have performed as an ordinary investors do.


Had an Investor invested directly in stocks, he would have multiplied his money manifold. So, Mutual fund Managers are not smarter than us. I prefer investing in Stocks directly instead of Mutual funds.


But investing directly in stocks do have some risks. Had anyone invested in Hindustan Unilever in Bse or General Motors in USA, he would have not seen his investment appreciate far the last five years. So, picking the right sector and right stock is more important in investing. Any secular bull market will sustain for five years to ten years. Always hold your investments till the bull market is over. Don’t shuffle your stocks in your portfolio frequently.

If one can follow the rules propounded here, then one can prefer stocks over Mutual funds.

Which one do you prefer?

Can we see revival of American Economy during Obama’s Presidency?

Ever Since, Mr.Obama took over the presidency of USA, the US Stock Markets saw a deep correction followed by sharp rally. But it is well below the highs of 2007. The US Stock Market Index Dow Jones Index made a high around 15000, in 2007. But it is trading around 10,500 now.

The Economy is gauged by the stock Market Indices in any country. So, if we want to know the future state of the Economy, study of Stock Indices would reveal the real picture. So, if Stock Indices behave well during his Presidency, than the Economy is going to perform well.

The Dow Jones made a high of 15000 in 2007. If the US economy performs well in his tenure, then Dow is going to move above 15000. Is it possible for Dow to move above this level? If so, then he will be recorded as one of the best performed President in USA history.

Let me examine the possibility in detail. Stock Markets behave in cycles. If you see a five rally then it will be followed by some period of correction. Normally, bearish periods are more in time than bullish periods, which means, Dow Jones has to remain in bearish mode for another 5 years.

Since Obama’s term will end in another 3 years, the chances are less for the Dow Jones to move above 15000 which in turn unlikely for the US economy to grow in the next three years.

If this happens and if Obama doesn’t get a second term, then he may go down in the history as an unpopular President of USA.

Fundamental performance of companies for the past five years

The fundamental performance of any company is the performance of their sales, net profit and etc. If it grows year by year then we can say it is growing. It can be stagnant or it can show negative growth. Some companies may show loss also.

So a company can grow positively, or it can grow negatively. Likewise, it can remain stagnant or it may show loss. The financial health of any company can be gauged by the financial performance of that company over these years.

Technical performance of the stock price may not really reflect the fundamentals. Let me discuss the fundamental performance of all the companies in the year 2008-2009. Though Stock Markets have rise all over the world in the year 2009, does it really reflect in the fundamental performance of the companies?

The performance of the companies started showing good growth since 2003 and it peaked in 2007-2008 year. In 2008-2009 period it showed negative growth in many sectors except few sectors. In 2009-2010, it has improved but not at the pace that we have seen in the last five years. To put it simple, the present growth is not as good as it seen in the past five years.
But Stock indices have rallied to 2008 levels which show that the present rally is not supported by the fundamentals. So, it is purely a technical rally in the Bear Market. One need to wait and watch for few more quarters of financial resulss before deciding about the future fundamental performance of the companies.

Cutting losses is the toughest decision to make!!!!!!!!!!

Ask any trader or an investor in the stock market or commodities market, he will say, the toughest decision he has to take is when he plans to cut his losses, if his positions goes against his way. The art of decision making is an important department in human’s life. Though decision making is the most important factor in trading, but it is been given the least importance.

For a trader to be successful, he has to be prompt and wise in taking decisions to cut his loss. If he makes a mistake in taking a decision in booking a profit, it will not affect him financially. But, if he makes a mistake in taking a decision in cutting a loss, then his capital would be wiped out partly or completely.

For a trader to take a wise decision during cutting his loss, he should plan his trade before he enters it. If he enters the trade with proper planning, then he will surely know, when to enter and when to exit.

Entry and exit are the important decisions, but, exit is the more important of these two. Even if you make a wrong entry, you will be saved by correct exit. Suppose you make a correct entry but you fails to make correct exit, then you will end up loss.

Traders who have mastered this art are the ones who are making consistent profits in speculative markets. This type of traders will be only a five percent of the total traders. The other nifty five percent traders are losers.

You decide in which type of traders you belong to.