Global Woes Return

The IT giants were going to lower the bar. They were slated to lower guidance. The markets seemed to be ready to net the news and move on. So, the day was largely uneventful as both Infy and TCS put out numbers. But, the lack of growth in this sector has significantly weakened the case for a secular market rally. With IT and pharma set to see a prolonged recovery, the market has become like an airplane running on just one engine. This only creates a more acute problem for fund managers and investors. They will find it even more difficult to move money away from performing stocks and stake them on the neglected ones. The markets will be further cornered into the belief that a small universe of performing stocks will remain expensive. The market's cheer leaders in these stocks will further be emboldened to raise the war cry and lift these already rich valuations. This makes the coming weeks very tricky for lay investors. With US elections and interest rate hike around the corner, a decoupled rally in small and mid-caps is the last straw on the camel's back. "To buy or sit out" will be a serious dilemma for investors already drunk on the performance of these stocks. Investors always need to stand up for their investment beliefs. Times like the present will test the belief system of investors. Those who respect value will eventually prevail. But, before that, they need to endure the noise and din that the markets will subject them to.