Burning Desires

Yogesh Vallabhbhai Gabani,

Chief Administrator,
Burning Desires
Published by,

How the global liquidity is driving the stock

market since past couple of months and
what could be the possible implications of
the same on upcoming treading sessions,
how does high beta stocks matters when
there is a high global liquidity in market.

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Why Investors must wring out

HIGH Beta from portfolio?

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What is driving the Market?

Even as many analysts believe that the
Indian markets are among the most
attractive in the world, Burning Desires
on behalf of community would like to
thank the country's strong growth
potential that it holds true. One should
beware that share rally recently seen
was mostly driven by liquidity sloshing
around globally and that with valuations
becoming pricey; investors should adopt
a more cautious tone.
Actual reasons for recent upward
rally in stock market has been,

Global Liquidity and,

Pricey Valuations

Market Entry TradeOffs

Burning Desires requests all the
community members to go easy on
high beta stocks as the valuations are
reflecting the stress on their balance
sheet. If you have a long horizon, now
is the right price to buy, if not the
perfect time.
Because, Dont mistake between
Right price to buy and Right Time
to Buy. Any one must be there at a
given time. If not, simply avoid
Buying.

What Do I mean by
avoiding high beta
stocks?

Money flow from developed economy to

emerging markets has been on
continuous boost due to saturation in
various economy world over.

Burning Desires does not anticipate

large correction but as market is
backed up by global liquidity, one
should avoid large beta stocks as small
correction can hurt the portfolio in
general.

Mind well
The stocks I am recommending
to avoid are the high beta
stocks. Justification for the
same is mentioned in the
report.

What all is going on?

We should consider the fact that the
markets are kind of waiting for some
more cues from the central banks and
we have two of them coming up in the
next few months, the monetary policy
review. We had the Fed comments
tomorrow and the review that the
Japanese central bank has promised as
well and globally markets are waiting to
see where this sort of ends up and what
outlook you can have on global rates
and liquidity and so on and India is no
different. Indian markets are being
driven by global tide and the waxing and
waning of that and once we get a better
sense of liquidity we will probably be
able to take a more near term call on
that. So, all the positional traders who
follow Burning Desires should be ready
to pump in their money in the market.
Globally we have been argued that
many of the asset classes have rallied
very hard. In fact most of the analysts
have also argued that you should be

cautious now because his indicators of

risk and euphoria are now in the
euphoria territory and while we are
long term bullish on both emerging
markets (EMs) and in Asia we would
again tactically argue caution until you
have further clarification on the same.
As in various awaited policy reviews
are lined up down the line.

Is it the right time to

move away from high
Beta stocks?
In Burning Desires opinion, Yes
because in India we will like the long
term story and there is little debate in
terms of the potential for economic
acceleration
and
differentiated
performance over the medium term
the short term rally has nothing to do
with those factors unfortunately as we
all know. We have not been able to
distinguish ourselves from an earnings
perspective largely and Indian markets
have been buoyed largely by global
liquidity as I have mention earlier also.
Sitting here it is very difficult to
forecast when exactly the tide will turn
but in that uplift valuations have been
taken to extremely high levels. So, if
you are caught out and the global tide
recedes in illiquid stocks or in high
beta stocks you may be caught very

rapidly and therefore the advice is very

simply market at 18 times is obviously
more risky than market at 14-15 times
and you should be incrementally taking
lesser risk as the market gets more
expensive going forward.

Sentimental shift
Between FIIS and DIIs,
Graphical representation
for past 11 Months.

Dont mistake between Right price to

buy and Right Time to Buy. Any one
must be there at a given time. If not,
simply avoid Buying.

Yogesh V. Gabani

Administrators View
There are certain happenings in the
market which would drive the Stock
market in forthcoming time are,

The redemption in all of this is for

earnings for start improving. So far in
the quarter we have not seen too many
consensus beats yet. But we could see
further rally once we have all the
awaited on the table as promised.

All Burning Desires community members,

What will drive the stock market

in forthcoming time?

Monetary policy review:

FII- Foreign Institutional Investors

DII- Domestic Institutional Investor
Net Buying (Monthly)= Total
Purchase in a given month Total
Sales
You can spot the reversal trend
starting from March, 2016 whereby
Net buying started increasing and for
DIIs net buying started decreasing.
This dataset for last 11 months is the
classic
example
of
opposite
sentiments between FIIs and DIIs
where the trend is just reversal and
vice- versa.

If we could attain above or equal to

LPA (Long Period Average) rainfall, we
will possibly see inflation under control
and cut down on interest rate and
interest rate transmission policy would
help to pass on the benefits of reduced
interest rates to borrowers, which
would drive the consumption.
If Global liquidity continuous then
Indian market will undergo huge net
buying from FIIs as money will flow
from developed economy to emerging
markets where, India being number one
contender as long as high growth
potential economies are concerned.
GST as being one of the legendary
reform in Indian Economy would be the
trigger for driving the stock market in
times to come. Though we should
assess the sensitivity of benefit for a
particular sector we are investing into.
-Yogesh Vallabhbhai Gabani,
Chief Admin,
Burning Desires