Global markets were spooked twice on Monday the opening day for trading in the new calendar year and then again on Thursday. In India we had begun trading on the 1st of January and had ended positive for the day. So great was the fall in these two days that a fairly stable economy like the US saw their markets lose over a 1000 points or 6.19% for the week. The BSESENSEX lost 1226 points or 4.69% while NIFTY lost 362 points or 4.54%.

What next? Is the China story over? These question come to mind as it emerges that infrastructure created in China was far ahead of its time. The creation of these assets caused a commodity squeeze and over the last few years we saw their prices rise through the roof. The slowdown is seeing a slump in prices of these very commodities and the fall is so great that many of these natural resources are quoting below their extraction cost. This whole cycle from base prices to boom and then bust has taken about 5-6 years.

I believe the world will take a long time to get over or adjust to a China without huge growth. With no other economy delivering this kind of growth other than India which is expected to grow at 7.8%, things are a little gloomy. One other factor in India’s favour is than roughly 2/3rd of the listed space universe is insulated against the China factor. These companies are involved in activities within India and therefore do not get directly affected by China. There will always be some effect from China on almost all companies but that would be relatively insignificant.
Markets in the meanwhile will continue to get hoodwinked by China and its retail investors who are probably the most active speculators in the world. The flip-flop by regulators about introducing circuit filters for the market and then within a week deciding to remove them is hurting the markets.

Be patient is the best advice one can give at this time and wait for key developments from the quarterly results which must show some trend this time.