Hi,

The last quarter was the most difficult one ever since this bull m

arket started in 2003. The tendency of stocks to respond to the force of stocks reflected such a tendency to respond to the force of gravity as they did in this quarter was profound.

This quarter saw two changes in The Equity Desk XI  with:

Voltas replaces TV 18 in The EquityDesk XI.

IDFC replaces Fin Tech in TheEquityDesk X

Being focused on financials, media, retail and infrastructure The EquityDesk XI stocks also lost a lot of in price from their January highs but since all these businesses are either leaders in their space or very close to that position there is reason to feel optimistic about their prospects going forward.

With the recent inflation scare and other data people can think in two different ways. The optimists would say that we are already down 35% from our peak so are we discounting the worst whereas the other camp would say that the worst is yet to come.

I wish there were easy answers to this. Personally I am convinced that over the next 12 months we will be higher then what we are today.

The coming quarter would be defining. Ever since 1992 we have seen that the moment the stock prices stop moving upwards companies are out in the market washing dirty linen and stating that growth is a problem.I expect no such thing to repeat itself – at least in for the front liners (sector leaders).

Companies dependent on capital markets as part of their business model or for raising funds could be under the hammer. In such circumstances it pays to be with companies where RoCE> growth.

The Global conditions add to the discomfort. The new buzz word in the financial markets is “coupling”. A point to ponder upon is had this story been in vogue how could our index have gone up 5 times over the past 5 years whereas the Dow done has nothing. This theory also rubbishes all claims of GDP growth differential. That means a country that can grow at 8%+ and a country that is nearing recession should have similar stock price movements.

It just cannot get more bizarre then this.

Anyone who was in the markets during 2000-03 and bought stocks (non tech) would know the kind of returns stocks given when they are bought in times where the mass public is abandoning them. But temporary losses in paper capital create permanent roadblocks to wealth generation.

During that time the analyst opinion was similar and the markets did respond but the real money was made by people who bought in 2000-03 rather then from 2003-07 (when things had dramatically improved).

# Stocks in maroon (pun unintended) are from The Equity Desk XI.

Regards,

Basant