Interest Rates !*%#)($*:-(

Up ... up... and away!! That's the story of interest rates in India. With the latest hike by RBI yesterday, its inevitable that rates are raised further. Now comes the tipping point. At what level will demand be curbed or increased.? Already, faced with a slowdown in new housing loan applicants, some leading banks have announced that they may not raise housing loan rates. Two wheeler loan rates are hovering around 22-24% p.a. up from around 15-18% just a few months ago.... and this has been coupled with a declining trend in monthly sales numbers. My guess is that after rising for a couple of months more.... inflation numbers will start plateauing and then will begin to fall around Nov-Dec 08. Because, over the next few months with increasing financing costs, demand for vehicles, homes and consumer goods will witness increasing fall in sales. With lower demand, funds will become more liberally available and thereby available at reduced rates. Already, corporates have warned of deferring expansion/modernisation plans due to high rates. So, having witnessed a near 50% rise in interest rates over the past three years, its time for taking a deep breath. Hang on to your home/vehicle purchase decisions till Dec 08. The first quarter of calender 2009 promises to be bring better tidings.!! Cheers till then.

Market Turmoil

To say that the Indian stock markets are in a state of turmoil would be to state the obvious. Experts opine sensex figures from 18000 by the year end to less than 10000. My guess is inbetween; around 13000 to 15000 would be more like it. At some point of time over the next couple of months, reasonable of valuations across sectors would be more visible and generate greater investor interest. Already, good stocks are available below BV and at PE's below 10 or 9. When Price/BV is less than 0.6 and PE less that 9, its a sure bet that the stock is waiting to be discovered. (Of course, assuming that the company is basically sound and the management is not interested in ripping you off!).So... hold cash and start investing gradually. You'll be rich in two-three years time.