Long & Short of Markets: Stock valuation tips from Raamdeo Agrawal; signals from options data


The pandemic-induced economic slowdown doesn’t call for extreme measures like the Great Depression’s ‘tighten your belts’ to prevent pants from falling off when people went hungry as they couldn’t afford meals. But to recover from this global slowdown, which may take years to return to pre-Covid levels, leading economists are calling for some tightening in the spending to discourage consumer-led growth and encourage grassroot-level savings. Read this and more in this weekend’s edition of ‘Long & Short of Markets’.

Bulls crowding the market
Equity bulls are crowding the options space, indicating that steam is building up for a pre-Budget rally. Looking at four scenarios from the recent past, the bulls taking an overwhelming position after a bottom results in a rally. Read here for more insights.
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Budget should be about targeted spending?
With a fiscal deficit already ballooning, broad-based spending is not the priority, said Sangita Reddy, JMD, Apollo Hospitals at ETMarkets Global Summit 2021. Other leading economists opined similarly with calls for increasing social security net and income levels at the grassroot level and cutting down debt by a systematic divestment plan. Read here for more.
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‘Tighten your belts!’
‘Tighten your belts’ seems to be an appropriate call for the next decade. Economists say the next 10 years will be a make-or-break period for India, as the economy is going into a rebuilding phase. Amidst a soaring sovereign debt, governments will be frugal with spending in the coming years and the focus should be on increasing income levels and discouraging consumption-led growth. Here’s more.
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When valuations don’t matter
If you are a long-term investor, should you be worried about valuations? Market veteran Raamdeo Agrawal says those who invest for 25 years need not look at the valuation because you can’t ascribe value to a stock 25 years beforehand. But for those investing for 5 years or so, valuation is important. Read here to know more about his views on valuation.
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RBI back to dollar-buying spree
RBI is on a buying spree in the forex market to neutralise the effect of foreign inflows on rupee. A weaker rupee aids exporters as they earn more rupee units per dollar. RBI is buying dollars in the spot and forward markets to hedge against the currency fluctuations as increasing foreign inflows means buying more rupees, resulting in the stronger rupee. Here’s more.
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