The Automobile sector grown at 25% in 2010 in India. It is one of the sector which performed well during 2010 along with Pharma and Banking sector. This year also it can grow as it grown last year.
The main strength of the sector is, it can grow when the economy is in growth path. The growth of this sector depends upon industrial growth and growing upper middle class people in India.
If the Economic growth of India continues as it is growing now in 2011 also, then we can expect the middle class to grow. If the income of this group increases, those people having two wheelers will buy cars. The recent incident of buying of 150 luxury cars costing around 40 lakhs in Gujarat is an example of the potential of this sector.
But it also have some drawbacks. If stock market and economy in doldrums then this sector is likely to see a negative growth. Comparing to Auto companies which manufacture HMVs, LMVs, the companies which manufacture two wheelers and cars can grow in 2011.
There are many opinions on analyzing stocks. The tools of analyzing a stock price is fundamental analysis and Technical Analysis. These two tools are different forms of analysis. One doesn’t depend on other.
Some people say, Technical Analysis is the best method to forecast the share price but some say fundamental analysis is the best way. Let us discuss the pros and cons of these two methods.
Technical analysis is done based on historical price movement of the Stock. This price is the ultimate result of the demand and supply. No individual can alter the demand and supply on his own. So, the price will always reveal the real value of that particular stock at that particular time. Any expert on Technical analysis can some what predict the stock market.
In case of Fundamental analysis, the data cannot be reliable as it can be subject to manipulation. The previous years performance can not be repeated this year also. A good growth projected based on demand and supply of its products cannot be also reliable. Even if it happens as per the projections, it need not be reflected in the share price.
We have seen many quality stocks haven’t moved inspite of bull market in other stocks and we have seen many fundamentally worst performing stocks moving up. The inference is, fundamental analysis doesn’t the have the edge to project the future prices.
An investment portfolio is the portfolio of investments made in Shares, Gold, Real Estate, Bonds, Deposits. One should know how should be this portfolio. Which one should have more exposure and which should have less exposure.
First, we shall take investments in shares. Shares are always high risk, high potential investments. They are mostly bullish in the long term. But in the intermediate period, they are bullish at a time and they are bearish at a time. So investments in shares should be made for more than 10 years.
Secondly Gold is always the preferred investment for middle class people. It can be easily liquidated. It also has bullish and bearish cycle. But the bull and bear cycle would be shallow in depth when compared to Stocks.
Thirdly, It is Real Estate. But recently, the myth about real estate that it will be always bullish is tarnished. The 2008 bear market is due to the burst of real estate bubble. But in the long run it will be always bullish.
Fourthly, it is investments in Bonds and Deposits. Surely, it is the most safe investment. But it is the least attractive investments in terms of returns.
Definitely the age plays a crucial role in the Investment portfolio. A model portfolio should have all the investments but the ration should be derived based on one’s age. A young person should have more exposure to stocks and a aged person should have more exposure to deposits.
The year 2008 saw the steepest correction and the year 2009 saw the fastest rally and 2010 saw a minor rally in terms of percentage appreciation. Gold has been in bull run since 2003 and it is making all time highs every month. Now gold is trading near 1400 USD.
Now the million dollar question is, will the bull run in Stocks and Gold continue in 2011 ? For the first time in history, Gold and Stocks are in bull run simultaneously which has puzzled many market pundits regarding the validity of the long believed theory the stocks and gold would always in different direction. Meaning gold will be bullish if the stocks are bearish, and Gold will be bearish if stocks are bullish.
The behavior of any market is cyclical. A bull market will be followed by a bear market and a bear market will be followed by a bull market. And also the magnitude of the bull market will depends upon the magnitude of the bear market and vice versa. Likewise, a multiyear bull market will be followed by a multiyear bear market and vice versa.
Considering this fact, the present bull market in stocks and Gold was started around 2003 and they have been in bull market for the past 7 years, the magnitude of the next bear market is also going to be a big one engulfing many years. The present bull run in the stocks and gold is likely to top out near 2011. So we can expect a top from this year.
Historically, Gold and Silver is moving against the direction of Stock Market. Around 1929 when US was in recession, the Stock Markets have seen a big correction. The Dow which was trading around 380 levels came crashing to 40 with in a span of 40.
The Big correction is followed by 15 years of consolidation. At that period, Gold was started moving up. As Investors find Gold and Silver as safe investments, they started investing in gold at that time.
When ever Stock Market crashes, pessimism prevails everywhere. The pessimism towards Stock Market drives the investors to a safe investment avenue. This is why historically Gold rallies when there is a bear market.
But the recent trend is Gold shows this trend is not applicable now. Since 2003, Gold and Silver are moving up. At the same time Stocks are also moving up. The price pattern in charts of stocks resembles the price pattern of Gold and silver. How long they are going to move simultaneously, we have to wait and see.
