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Sunday, November 16, 2008

The Investment World according to JP Morgan

Last Friday (Nov 14, '08) I attended an investor's meet arranged by HSBC at the Taj Bengal, Calcutta. The featured speaker, Harshad Patwardhan, Fund Manager of JP Morgan Asset Management, gave a slick presentation with lots of charts and graphs titled "Invest with Conviction".

Here is a gist of what he said.

* The worst is behind us; however, the pain is far from over

* Economies will contract world wide; there will be deceleration of growth

* Inflation is coming down; interest rates may come down also

* Indian GDP growth may moderate to 6.5 to 7%; China's GDP may be around 8 to 10%

* FII selling has been more intense in small and mid caps; likely reversal of FII flows in '09 with increased allocation to India and China

* Large part of the hedge funds' selling is over

* There seems to be a mood change in the market; 12 months down the line, things will look better

* This is once in a decade - if not once in a lifetime - opportunity; increase allocation to equities

* Invest in companies with 'robust' balance sheets and 'robust' business models

That was the good news. Now the bad - the floor was opened to Q&A.

* The Company Secretary of Exide said that he had visited three different banks including two private sector ones earlier that day. All had been very considerate and welcoming, only to quote terms that no self-respecting organisation could accept. So how can the worst be over? If this is happens to a company of the stature of Exide, what must be happening to smaller companies?

* An elderly investor said that he had listened to his funds advisor at HSBC and invested in JP Morgan's Equity Fund and JP Morgan's Opportunity Fund. Now that he is losing heavily in both and has no funds left, how can he invest more?

* A merchant exporter said that overseas buyers have stopped delivery of orders and there is hardly any movement of outward or inward cargo. So where is the mood change?

There were several other questions in a similar vein. Finally Mr Patwardhan had to accept that things were not quite 'hunky dory'; however prices of shares had reached 'mouthwatering' levels and investors should consider putting some money back into the market.

His plea would have been more credible if he had said that investors should protect their capital by putting their money in a 1 year FD and get back into the market when the first signs of a turnaround was visible.

As the Finance Director of Nicco Corp. quipped: Poor chap, he is only trying to earn his keep. If we don't start buying, he may lose his job!

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