Buy Gold, Sell IT Front lines, Hold China


Dear Investor

Markets have been showing shaky signs since last few days. World markets are already in down trend and reports of GDP, Unemployment and recent speeches of Fed Governor Bernanke and others have been constantly saying that Economies across US and Europe are still on ICU Support but has recovered from Critical condition. I do not know what is the difference between the two. But, that is the reality.

Gold has continued rallying as I have been saying since long. Silver has also tried to mark higher highs. But, trade carefully with Silver. It is more a kind of an industrial metal then crisis hedge.

Upon inspecting IT companies rigorously, I found that upside has ended and can get into mid term decline. If you are holding any front line IT stock, get out of it immediately.

Fundamentally also IT stocks are vulnerable to many domestics and external factors.
a. Attrition ratio is increasing and with that cost too
b. US and Europe — recent data from both the continent exhibiting increased weakness in Economy, that will put pressure on new orders,
downside revision of existing orders and severe pressure on margin
c. Dollar has been into free fall, though rupee has resisted upside because of our own fiscal deficit and loose monetary policy post crisis but as
RBI tightens the policy to curb inflation, rupee will go up. Infosys said after its 1st qtr result that it expects rupee to go up significantly in a year.
Technical weakness can be clearly seen on charts of IT companies.

China market has started outperforming rest world as I had been writing since long that China and Gold are contra world markets.
I reiterated buy on Shanghai on 23rd July when it was trading around 2550, with today’s close at 2783, it is on 10% gain. But, hold on China, that market has lots of upside still left.

Best luck

Investment Academy



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