Booster for Emerging Markets !!!

The G20 meet which ended in London made two things crystal clear –

1) From now on, the role of the US as the world’s policy maker gets diluted and
more importantly
2) Developing and emerging economic powerhouses like China, India and Brazil will have a greater say on the world economic platform.

The conclusion of the G20 meet to pull the world out of the current recession, one of the biggest in the last 75 years, should be treated as historic and clearly ‘path-breaking’ for countries like India. In fact it is a major shift of power from the western world to the ‘BRIC’ nations along with other emerging Asian countries!

The MSCI Emerging markets Index rallied more than 6.50% yesterday (2-Apr-09) to a level of 67 points. Recently in first week of Mar 09, it had touched a low of 55 and has since recovered more than 20%.



The MSCI emerging markets index which started with base of 100 as of 31-Dec-1998, had peaked at 144 in May 2007 has lost 53% of its value from the peak.

However the technical chart and price movement analysis of the MSCI emerging markets index shows that a bottoming out and reversal of the downtrend is near.

There is, what we call, a positive divergence on the indicators and the price movements and technical price patterns suggest that a further up move of another 15-18% in the MSCI index is likely in the coming few weeks.

This is then suggestive of more funds flowing into the emerging markets in the next few weeks, including in India. This augurs well for our markets.

We expect investor activity to increase as the profit making opportunities increase. The valuations of most of the stocks appear quite cheap and hence a follow up buying at these low levels can surely give very good medium term returns.

We are continuously providing delivery based calls and it is time the investor grabs more of these for short and medium term profits.

CA Rajiv D Khatlawala,
Head of Research,
Jhaveri Securities Ltd.