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Is this another time to buy ?

As every year, October month seems to be keeping up with its promise of being one of the most volatile month for stock markets. It started with a bang with Dow reaching record level on Oct 9 just to fall back about 5% in next 10 days culminating on 20th anniversary of famous 1987 crash!
What a day Friday was with all events like options expiry, India and China markets crashing and on top of it wide coverage of 20th anniversary of 1987 crash in mainstream media!

No wonder people got little scary and that's when it presents great buying opportunities. As I predicted in mid-Aug, I think this slide presents another excellent buying opportunities for long-term investors. My hypothesis is based on following analysis:

  • Even though results from companies from financial and to some extent industrial sector are weak, other sectors like technology are producing very handsome results due to weak dollar and exports.
  • Employment is still very strong with no major layoff annoucements outside mortage sector
  • Emerging countries are still red hot with projected growths of 8-10% in India and China
  • Consumer spending growth during holidays would be in about 3-5%
  • Most importantly, Fed is on investors side. Looks like credit turmoil will take about 3-6 months to play out and hence Fed may have to cut rate by another 25 basis points either in Oct or Dec meeting. This should give another shot in the arm for markets
Based on these, here are my macro predictions about some of the critical markets around world
  1. DOW will be back above 14000 by year-end
  2. S&P will touch 1600 by year-end
  3. India's BSE sensex will touch 20000 by Mar 31, 2008
  4. Shanghai composite will resume its march and if I have to make very bold prediction, may touch 8000 by Aug 8, 2008 (when Olympics start)
  5. HangSeng will touch 30000 by year end
  6. Fed rate would be 4.5% by year-end
My recommendation would be to go for mutual fund or ETF round instead of individual stocks.

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