Hit and misses of 2008!
Well well well!!! the New Year is finally upon us and that disaster of a year 2008 is finally behind us. Yes we all know that the Sensex which was suppose to touch 25,000 by now (last year’s prediction) has missed the mark by nearly a whopping 60% and we poor retail investors are left wondering what went wrong?
Ok, instead of rewinding and again drowning our sorrows in the local bar, let’s see what the so-called experts had predicted – their hits and misses.
Mind you these so called experts are not visionaries or financial stalwarts, they tend to form a collective opinion and disseminate that to us with confusing graphs and even more complicated jargon like ‘financial tsunami’ ‘decoupling,’ and, obviously word of the year, ‘bailout.’
Miss 1: India is decoupled and will continue to grow in excess of 8% (GDP growth) – Well not only did the economist pack get this one wrong, our very own economic agencies and the infamous ministers got their expectations horribly wrong. The only saving grace has been that the various economists have been fairly quick to revise their numbers while the others are still arguing that the next few months are tough but then we will bounce back just like a baby on a trampoline.
Miss 2: The classic market trap – 22nd January ‘08 – Sensex @ 17,000 – a life time buying opportunity – Well from the looks of it, the last 11 months have presented more buying opportunities. Everyone including the shoe shine boy at the station had formed a view on the market and 25,000 is the first target of 2008. Fun(d) managers who were on TV boldly stating that any fall in the market should be seen as a buying opportunity, were themselves holding on to cash levels of 25-30% in their funds…strange ?
Miss 3: Oil to boil – Oil, a commodity whose movements are most difficult to predict, saw everyone comment that from levels of USD 100/bl it will cross USD 200 then will peak at USD 250. No one understood the basic economics (Well, I have understood this in hindsight) that a weakening global economy – rising unemployment will see people being conservative thereby leading to demand destruction.
Miss 4: Chinese and Indians eat too much? – World wide there is a shortage of farm land and we Indians with our fellow neighbours are living it in style by eating more than required. This was suppose to keep agriculture commodity (rice, pulses etc) firm. Well, speculation got the better of this pack.
The only HIT: Developed nations are expected to weaken due to the housing crises. Well most of the economists were a tad bit correct in getting this one – though the quantum of the crises and its time line was not fathomed by them.
Enough of this re-wind, let’s see what’s in store for 2009 by the so called financial gurus:
Inflation in India expected to become negative by middle of the year – that does not mean that all our groceries will become cheaper; it means that prices of around 450 articles (of which we can associate ourselves with a maximum of 100) will ease.
India to grow at a slow pace of around 6% during the year and then bounce back with a bang in 2010 – Well these expectations are based on more policy actions by our central bank (read: more rate cuts – cheaper loans, etc)
Sensex to bounce back by end 2009 to levels of 13,000 – 15,000 – Wish my crystal ball was working as these seem to be shots in the dark
Logically, when a fall has been so steep and with our economic condition deteriorating, such predictions seem to very difficult to digest.
Anyways, as they say, avoid the noise to investing, keep a steady focus towards your financial goal and work towards them. Remember that the market has cycles and as the famous economist John Maynard Keynes said, ‘The market can stay irrational longer than you can stay solvent.’
Enjoy the ride!!
Prateek is a financial analyst and has been tracking the markets for more than five years. Views expressed here are his personal opinions.