Return of the dragon for the markets in beginning of calendar 2016, though not a welcome sign, it was waiting to happen. All the effort that the Chinese government is making to stop the markets from sliding down is becoming counterproductive. Following the market crash in August 2015, they had imposed a ban on selling for large investors for a period of 6 months, which is now coming to a close and in the meantime, they introduced shorter circuits. Circuits are a mechanism to put the market to a halt when it goes out of control in any direction.
This new decision brought more selling pressure and their markets hit downward circuit twice in a week. Overall strength in the Chinese economy is very low, it cannot get revived overnight. Even if they strengthen, there are no chances that it will be the same as it was in the last few years. China story is over now, whereas the tremors that this behemoth economy will bring to the global markets are going to be pretty high. As the Chinese government take the next step to devalue their currency which is expected to be 4-5% from the current levels, it will impact the emerging markets highly.
Export businesses will take a hit and following this event, USD is likely to touch or move past Rupees 71 to a dollar.
As the large cap stocks have taken a bigger and prolong hit, recovery is likely to be in that segment, though it might give significant gains, it will for sure help the SENSEX and the NIFTY give some decent gains in 2016. Mid Cap stocks will take a back seat this year and there are likely to be many exits in our portfolio and to some extent this space will get occupied by Large Cap stocks.
While there are opportunities available always in the markets to grow our savings if we are able to identify good growth companies, which is the stronghold strategy at BTT.