Key note address delivered by Christopher Wood, equity strategist, CLSA, in his first public appearance in India, at the ET Now Market Summit-2010. Excerpts:

Hello everybody and thank you for asking me. I will be running through some charts which were still first with the situation in the West. Then I will move on to charts on Asia and India. So I get the bad news out of way first. But this seems to be the wrong way around. So I am getting from back to front here. (Watch)

To start with the US situation, this is a big picture chart everybody needs to be aware of in the global economy. This is US total debt as a percentage of GDP. The story is very simple and the total amount of debt in the system in the US has been going down ever since the credit crisis erupted in 2007-2008. This the first time total debt has been falling in America since the Great Depression.

Mr Bernanke of the Federal Reserve has been trying to get the re-leveraging game going so far, they have not succeeded. My operating assumption is to assume that the leveraging will continue that we peaked out in the US super credit cycle in 2007, which has been running since the Second World War and now in a long-term de-leveraging cycle, which means lower trend GDP growth.

May be re-leveraging will kick in coming months in which case I will change my view, but for now I am assuming it’s a de-leveraging cycle until the data proves otherwise. Next chart you see US total net credit market borrowings and you can see the rate of growth of borrowing has been going down in the system despite the big kick up in Federal Government borrowing.

Next chart is a long-term trend in US nominal GDP 10-year compound annual growth. As the Japanese example has shown in the last 20 years, when you get into a deflationary environment, it no longer makes sense to look at real GDP measures because when inflation zero level what gives a more realistic picture of what is going is nominal GDP. And in my view, nominal GDP growth in America will continue to trend down. We have seen a big rally in US government bond prices this year, as telling you the trend nominal GDP growth is lower and that means the trend earnings growth, trend revenue growth in America is also going to be lower.
Then next chart relates to the consumption story in America which in my view is going to remain anaemic. In my view the US consumers, western consumers in general, are going to be increasing savings rate. There is also a demographic kicking in… the baby boom as heading for retirement, but they cannot afford to retire. So topline is US real disposable personal income, the bottom line is real personal income excluding current transfer receipts. Transfer receipts basically mean welfare payments. So you can see without all the stimulus from the government the fundamental income trend is much weaker. What separates the emerging markets from the developed world is an emerging markets like India with healthy income growth and the developed countries, be it the US, Japan, Europe, we do not have healthy income growth.

Next chart highlights a significant rally in US Treasury Bond prices reflected in declining treasury bond yields which has happened this year. At the start of this year the biggest bearish consensus amongst global equity investors was that US Treasury bonds were screaming sells.

Everybody said that the treasury bond market is going to collapse, the Fed printing money inflation is coming back. Clearly that consensus was completely wrong. US Treasury Bond market has been rallying even with the recent pick in the S&P and recent weeks up to 1150 level which I think was a peak of this counter trend rally. Even with the stock market rally the bond market did not sell off. What this bond market is telling you is that nominal GDP growth is slowing in America, it is telling you it is not a normal recovery. The credit multiplier is not working.

Once the inventory cycles happen & the US capex cycle has ran through, there will be nothing left to sustain the economic momentum. So in a deflationary environment, government bond prices are lead indicator of nominal GDP growth. Right now this is a very important point because the US bond market is sending one message and the US stock market is sending another message and basically investors have a decision to make – do they believe the bond market is giving the correct signal or the stock market? My assumption is that it’s the bond market and my experience is that the bond market is no way smarter than the stock market 90% of the time. Meanwhile, this is US headline CPI inflation for the rest of this year we are going to see inflationary pressures falling throughout the world in the West. That’s going to lead to new deflation concerns.

In Asia and countries like China and India, falling inflationary pressures are going to be bullish and everybody is going to realise it does not make sense to worry about inflation in countries like India. The good news is that you have inflation because that reflects the fundamental growth dynamic. But the key point about the US is if the trend over the past 3 months has extrapolated forward, US CPI inflation will turn negative in October. If that happens, it’s not going to be bullish for equities, it’s going to be bullish for government bonds and it’s going to be a signal for Mr. Bernanke, if we have not done that already, to assume quantitative easing.

Next chart, US average duration of unemployment. So basically there are large groups of the structurally unemployed in America. So in this sense, the US is heading for the European systems situation were you have a large group of structurally unemployed living off the welfare state. The problem in America is that the welfare state is much more controversial than in Europe, hence the political divide in America, hence the growing trend under the so-called Tea Party movement.

Meanwhile the classic monetary measures are highlighting the fact that we are not in a re-leveraging cycle, we are still in a deleveraging cycle. This is the US money multiplier representing the velocity of money in circulation. Velocity of money in circulation is declining. So long as that line is declining, it’s deflationary. We don’t have to worry about inflation picking up, and this chart highlights the growing deflationary threat.

Next chart is US broad money supply growth. Again, money supply growth is going down. That’s why the bond market’s rallying, that’s why inflation is not an issue, that’s why Mr. Bernanke is now looking for an excuse to resume quantitative easing.

Next chart is US bank lending. Again, no real sign of any kind of meaningful pick up in bank lending annualise lending loan growth continue to slow another indication of a deleveraging cycle. This is not just about banks restricting credit, it is also about a change in psychology, economic agents be it the companies or consumers have become more risk averse about borrowing.

Next chart is US total securitisation issuance. In the recent credit boom before the bust a large part of the credit cycle was driven by securitization, therefore we are going to get re-leveraging in America. We need to see a healthy pick up in securitisation as well as banking lending, but the only area that has picked up since the crisis is the dark blue line here.

This is agency mortgage bank securities, that’s Fannie Mae and Freddie Mac. These entities are guaranteed by the Federal Government and therefore they do not really count. Any private sector securitisation has barely recovered. Meanwhile the huge role played by Fannie and Freddie should not be ignored in terms of supporting the housing market.
Basically about 96% of the America mortgage market now is government guaranteed. So that’s the US situation. The big picture is still deflationary. However, in terms of macroeconomic shocks that could cause another steep fall in global equities this year for the rest of 2010, I still believe there is going to be another sharp decline in equities like we saw in April and May. It’s more likely to be triggered by the Eurozone where you have systemic risk relating to government debt.
So this chart relates to the ECBs net buying of Euroland government bonds. The key point here is this ECB was forced reluctantly to stop buying junk government bonds in Europe like Greek government bonds in May when the Greek crisis blew up. The interesting point is the ECB is only doing this reluctantly and as equity markets have rallied and the credit spreads have come in, the ECB has progressively bought less and less junk government paper.
Basically last week they hardly bought anything – they’re probably going to go down to zero just as this counter trend rally peaks.

How early we go down depends on whether there is another bout of risk aversion or markets are just focusing on waning growth. This is Greek and PIG government bond yield spreads. I was recommending for several years the investor should bet on wise widening PIG spread. PIG spread, for people who don’t know this, is the average bond yield of Portugal, Ireland, Greece, Spain over the German bond yields-I closed out that just about when the Greek crisis peaked. And I think a better trade is going forward is what I called a Spanish flu trade, betting on rising Spanish CDS.

For now the jury doubts on whether these European countries can make the fiscal adjustments being demanded by the Germans, but people should understand that the Germans have a completely diametrically opposite view to the Americans – they simply do not believe that fiscally stimulating is the way to get yourself out of the economic problem. So right now the weaker part of Euroland has embarked on a fiscal adjustments which is intrinsically deflationary, given the downturn they are facing.

The stress test is being led by Ireland. Last year the Irish economy contracted in nominal terms by more than 10 percentage points. So far the Irish are taking the pain probably because the only boom they have had in the last 1000 years was when they join Euroland community. So in that sense willing to take quite a lot of pain, but in the big stress test it is going to be Spain.

Spain is a big important country. They had a massive private sector debt binge, they got the biggest housing bust in the west, even bigger than the US. So it is going to be interesting to see whether the Spanish political system can make this fiscal adjustment, given the fact they already have nearly 20% unemployed. I have an open mind on this. We just have to see what happens and may be the Europeans can make this fiscal adjustment, in which case it’s going to be a lot of pain, but the Euro as a currency is going to merge with huge credibility.

On the other hand, it may well be that this level of fiscal austerity is simply incompatible with the political systems of these Mediterranean countries. Right now, it is impossible to tell the European who is watching the football and now at the beach we can have a much better ideas they can take this pain by about January-February next year.

But in the meantime if the markets will test or are bound to test the European’s willingness to take this fiscal adjustment in the next few months. Tactically I would be selling the Euro against the dollar here as we had a significant bounce back in the Euro. So those are my thoughts on basically the West. It’s a deflationary environment. But in the US we are going to continue to stimulate in the Europeans because the Europe’s case is going to follow the German President.

Turning to Asia, Asia is a fundamentally healthy story unlike the West. In my view, the peak of the Asia ex-Japan index you saw prior to the credit crisis will be exceeded sooner or later because the Asian economies are growing healthily and have effectively decoupled from the West even though the markets haven’t. This is MSCI Asia ex-Japan relative to MSCI world index. They’ve been in & outperforming trend since the bottom of the Asian crisis in 1998 and that outperforming trend is resuming when the Chinese stock tightening and then formally start easing again which will happen in the next few months. That will reaccelerate Asian outperformance.

Valuation wise, Asia is trading in line with the US on the 12-month forward PE basis. In my view, sooner or later Asia is going to trade at a sustainable premium over the West because the fundamental growth story is so superior. In terms of my relative return asset allocation, I’m going to take a detour here. I am structurally overweight on India and Indonesia as these are the two best long-term stories in Asia. But tactically I have reduced India a bit and raised China because we are going to get a policy inflection points in China in the next few months which will be bullish for Chinese stocks.

But my big underweight in Asia Pac portfolio is Australia which is why I’m weaving more money into China because it has become cheap. What I am underweight on is those stock, sectors, countries which are perceived as beneficiaries of Chinese growth like the commodities sector, because in my view, Chinese growth is going to be slowing for the rest of this year and that’s a negative headwind for the commodities complex.

From an Indian standpoint that was obviously positive. I think oil is going this week to be as high as it’s going to get on its counter trend move. Clearly if you are more bullish on oil, you will be more bearish on India and this is my long only portfolio on Asia or ex-Japan.

I started this portfolio beginning of fourth quarter 2002, sent about 25 to 30 stocks in it, mostly large cap. I cannot have any cash and it’s long only and is basically playing the domestic story in Asia as always. Mostly has the biggest weight being in India because India since always has been my favourite equity story in Asia. It’s still got a big weighting in India. We can argue about the details of what stocks to own etc, but fundamentally this has India. Secondly, China if I did not have a big capital orientation, then I would have less in China, more in smaller Asian markets like Indonesia and Philippines.

That’s the performance of my long-only portfolio compared with the benchmarks. Since I cannot really have cash, as I said, so I cannot really hedge it, but for those who want to hedge I have been recommending since the middle of over 2007 that investors hedge this long Asian exposure by shorting western financial stocks. I have now narrowed that down in recent months into not shorting western financial stocks, but shorting European financial stocks because European financial stocks are much more geared to the systemic risk from junk European government debt and they are also in a much more leverage than American financial stocks.

This is my global portfolio I have also been running since 2002. This has run on a theoretical US dollar denominated pension fund on a 5-year view and this portfolio I have simplified in recent months have got 15% weighting in US 30 year treasury bonds.
That might seem crazy to people given the fact that the US government debt is getting bigger & bigger, but one of my views is that the most likely end game is a sovereign debt crisis in the US and the collapse of the US dollar paper standard. I don’t think that end game happens this year and in my view before this oust in the game is played out the deflationary pressures in the US will take bond yields much lower. So I think it’s quite possible the 10-year Treasury goes 2%, 30 year treasury goes to 3%. For people who think that’s insane, I should point out that the 10-year GDP went below 1% this week and in 2003 got to 0.45 basis points.
So the message is that in deflationary environment bond thing gets very low indeed because the risk aversion causes people like banks, insurance companies, individuals to buy bonds to lock in income because in deflationary environment there is not much income around. So that’s the deflationary hedge, but 45% of my portfolio is geared to the best story in the world, which is Asia.
So I got 15% in Asia or ex-Japan physical property, 30% in my long-only Asia or ex-Japan portfolio. Then I got a longstanding position in gold and gold mining stocks which I have since inception of this portfolio and this position in gold is basically hedging for US dollar denominated pension funds. The big picture risk is that one day simply the world revolt against the ongoing US stimulus and there is a sovereign debt crisis in the US dollar, US government debt, which means the end of the US paper standard and the end of the post 1945 Western paper currency system. And in that environment gold can go parabolic. My longstanding target for gold that can peak in this bull market is $35000 per ounce.

So this is a gold bullion chart in US dollar terms. The key point about this chart is that it’s quite obvious gold is in a bull market and remains in a bull market and this bull market, when it ends, will end in a parabolic spike which we have not seen yet. The next obvious trigger for the next big move in gold will be the next time Mr. Bernanke adopts quantitative easing and the next time he does it he who is going to have to expand the balance sheet more than the last time (because otherwise people are going to worry if it’s going to work), but cannot do it right now because the news flow is not bad enough.

Gold stocks relative to gold bullion price. In my view gold stocks made that relative low to gold bullion price in 2008 when commodities collapsed. So for equity managers who cannot buy pure bullion I would say look at gold mining stocks because if gold goes $35000 per ounce, it is going to be massive operating leverage for those mine. Gold stocks that actually produce gold haven’t hedge the gold and on jurisdictions where governments don’t cease the gold often.

I am turning to some Asian Pacific charts. I will just run through few charts on China that’s a big story for everywhere as I say Chinese market has underperformed this year. The key point to understand about Chinese stocks is that they are policy-driven. Indian stocks are earnings-driven while Chinese stocks are policy-driven. The Chinese government is tightening, that is why the market has been going down. When the Chinese government starts easing, the Chinese stocks will go up and then may be outperforming Indian stocks for a period.

Real GDP growth in China. China growth peaked in my view first quarter. It’s going to be slowing for the rest of this year probably an annualised growth 12% first quarter, may be down to 1% by the fourth quarter. That is going to create a lot of market noise. It will be negative for commodities. It’s not a big deal, but it will create a lot of noise. Chinese bank landing has slowed dramatically this year from the surge last year. China is a command economy banking system. So that looks dramatic, but that has seen the loan growth slowing to 18% which is still respectable, it’s not cold turkey.

China has been tightening on the property market. So what the stock market in China wants to see is more and more developers willing to cut property prices because it’s more than evident that developers are stopping raising prices and starting to cut prices. The greater the hope that the Chinese government stops tightening that process should play out in the next few months. As you can see here average daily residential sales of Chinese properties have fallen pretty dramatically since April when the government got more aggressive on tightening. You’d have read a lot about Chinese property bubbles, especially in America.

The Chinese property markets have a lot of excess supply, but it’s not a bubble because you have very conservative mortgage financing. What you do have there is a lot of high end developments sitting 80% empty. So Chinese people like to have lot of flat value and don’t like to have flats once used because they think a used flat is devalued just like a used car.

What about the currency? When the renminbi starts to rise against the US dollar incrementally, maximum incremental appreciation will be of 5%. So the Chinese are going to let their currency go up slightly, but you are not going to get any aggressive moves.
I got a chart on Hong Kong just to highlight that we have got a big long-term asset inflation story in Asia. The quintessential asset inflation story in Asia is Hong Kong because of the supply constraints. In my view, Hong Kong property would sooner or later exceed 1997 peaks. You can get a mortagage in Hong Kong today for less than 1%. There you see, apart from Mumbai, this is a one property market in Asia with the massive supply constraint. This is a new supplier residential properties. So Hong Kong I think is a classic asset inflation story to monitor.
Turning to India, I would not go too much linked to India because everybody over here would know more about it than me, but we probably had a big inflation scare at the start of this year. In my view, it’s fundamentally silly to worry too much about inflationary pressures in Asia.
We should be celebrating the fact that there is inflation because if there wasn’t inflationary pressures in Asia, it would mean the world is facing a global depression because there is no growth dynamics in the developed world. So I am glad there is inflationary pressure. Having said that inflation is going to be coming off in India for the rest of this year which means that concern should recede. The central bank will continue to tighten incrementally. I think that’s sensible given the external environment, but I think incremental tightening that the RBI is doing is enough to upset stocks here unduly.

Bank credit growth. This I think is a very important chart. The Indian banking sector is a capitalist banking system unlike the Chinese system. So when the economies slow, the banks slow their lending whereas in China they were ordered to lend more. Now the credit cycle is picking up again, that’s a very healthy development. We are looking at about 20% loan growth in India this year. But I think the most important positive points of all is that the credit cycle is being led by infrastructure loans, not personal loans, as you can see from this chart. This raises the key point which in my view is the critical bearable for the Indian macroeconomic story this year and for the next 5 to 10 years is whether we can get an infrastructure cycle playing out.

The fact that infrastructure loans are leading the credit cycle is anecdotal evidence that is happening. If we get infrastructure happening in India, it’s quite possible that India can grow at 9% plus a year for the next 5 years at least, if not 10 years, which means that India in my view is going to be growing more rapidly than China. In my view a more basic trend growth in China is going to be 8% and that’s a growth rate that Chinese Communist party is going to be comfortable with. So the higher growth rate in India than in China, if the infrastructure story happens, is going to raise the profile of the Indian story globally.

Clearly if I am wrong and infrastructure does not happen in India, the whole Indian story becomes much less interesting. It’s not a disaster, but the country only grows just 5%-6%. So this is fixed investment relative to GDP in India. I am expecting this line to pick up again. Car sales, two-wheelers sales are going up. So the consumer story is still perfectly good story in India. It has picked up with the monetary easing, but as I say the key variable for me is infrastructure.

In terms of risks to the Indian markets, probably the biggest risk to the Indian market is simply the huge amount of foreign money. My own guess is that the next time there is a global hiccup, foreigners will sell India less aggressively than in 2008 for the simple reason that India has shown it can decouple from the US economic cycle.

The other point is the fact that foreign investors stay much in India is basically confirmation that India is a good story and those foreign investors who have not yet invested in India are all desperately waiting for a correction. So they can invest, that’s the mindset of them.

One year forward price to book. India is not cheap, but it’s not expensive in the context of Indian stock market history and in my view the Indian stock market will continue to trade at a premium to Asian and mother of emerging markets because the Indian market is like one big growth stock and growth stocks trade at a premium. Clearly, if you want to enter in an equity portfolio for dividends & you don’t buy India, then you should go and look at Singapore.

This chart perceives a useful chart for anybody who is trying to raise Indian funds in the room because it shows a huge outperformance of India – MSCI India relative to MSCI China in recent history. I will just end with the 3 charts on Japan & the reason I am doing this is because of my experience when I lived in Japan in the early 90s and the experience of Japan in the last 20 years is a potential lead indicator of what is going to happen in the West.

A new report argues that current public health guidance on high blood pressure focuses too narrowly on cutting sodium, and that combining sodium reduction with increased potassium intake could offer a more effective approach to preventing and managing the condition worldwide.

High blood pressure, also known as hypertension, affects more than 1.28 billion adults globally and remains a major risk factor for cardiovascular disease. Current public health recommendations have generally emphasized reducing dietary sodium as the primary intervention for lowering blood pressure and protecting heart health, according to the report, published in the American Journal of Clinical Nutrition and supported by the IAFNS Sodium in Food and Health Implications Committee.

The physicians and health experts behind the report argue that sodium reduction efforts may prove more effective when paired with a deliberate increase in potassium consumption. Potassium can also serve as a partial substitute for sodium within salt itself, offering food manufacturers an additional tool for reformulating products to reduce overall sodium content. According to the researchers, growing scientific evidence about potassium’s specific role in regulating blood pressure supports a fundamental shift in how public health guidance approaches the issue, moving away from treating sodium and potassium as separate, independent dietary factors and instead addressing how the two nutrients interact within the body.

Naomi Fukagawa, professor of medicine emerita at the Robert Larner, M.D. College of Medicine at the University of Vermont and the report’s first author, said the findings call for a broader, more integrated approach to dietary guidance. “It is time to view dietary interventions holistically because food components interact and physiology is integrative across systems,” Fukagawa said. “Growing evidence shows that increasing dietary potassium as well as reducing sodium intake work together to better manage hypertension.”

The peer-reviewed report reviews the existing evidence supporting current sodium and potassium intake recommendations, examines potential methods for simultaneously reducing sodium and increasing potassium in the diet, identifies practical obstacles to implementing those strategies at a population level, and outlines research and policy priorities the authors say could help improve public health outcomes related to blood pressure going forward.

According to the report’s authors, both excessive sodium consumption and insufficient potassium intake represent major, modifiable dietary factors contributing to elevated blood pressure. Average sodium consumption continues to exceed recommended levels across most populations, while potassium intake is frequently “far below optimal levels in both developed and developing nations,” the authors wrote.

Fruits, vegetables, legumes and dairy products rank among the primary dietary sources of potassium, according to the report. Food manufacturers seeking to reduce sodium content in processed foods can incorporate potassium-based salt substitutes as part of product reformulation efforts, though the report notes practical limitations to that approach. When potassium salt is added in excessive amounts, foods can develop an unwanted metallic taste, requiring manufacturers to carefully balance sodium reduction against potassium enhancement when reformulating existing products.

The report’s authors were careful to frame their conclusions as building upon, rather than replacing, existing sodium-focused public health strategies. “Dietary sodium reduction is a foundational strategy for hypertension prevention and management,” the authors concluded. “However, new evidence supports a broadening of the current approach that focuses solely on sodium reduction and provides equal emphasis on increasing potassium intake.”

The report adds to a growing body of recent research examining the relationship between dietary potassium and cardiovascular health. Earlier scientific modeling published this year found that increasing potassium intake could have a comparably significant, or even greater, effect on blood pressure than reducing sodium intake alone, based on simulations of how the kidneys, hormones and cardiovascular system respond to varying levels of sodium and potassium consumption.

The University of Vermont report was authored by a team that included Fukagawa alongside co-authors Paul Welling, Janice Johnson, Kristin Reimers, Soo-Yeun Lee and Patricia Zecca, and was published in the American Journal of Clinical Nutrition’s 2026 volume.

Public health experts have generally cautioned that individuals with certain underlying health conditions, including kidney disease, should not significantly increase their potassium intake without first consulting a healthcare provider, since impaired kidney function can prevent the body from properly regulating potassium levels, potentially leading to dangerously elevated blood potassium levels known as hyperkalemia. People taking certain blood pressure medications, including some diuretics and ACE inhibitors, may also need individualized guidance regarding potassium intake given how those medications can interact with the body’s potassium regulation.

Given that hypertension is a serious, widespread medical condition linked to significant cardiovascular risk, the report’s authors emphasized that its findings are intended to inform broader public health policy and food reformulation strategies rather than to serve as a substitute for individualized medical advice. Anyone with diagnosed high blood pressure, kidney disease or other relevant underlying health conditions is encouraged to consult a doctor or registered dietitian before making significant changes to their sodium or potassium intake, rather than relying solely on general public health research to guide personal dietary decisions.

NEW DELHI: Dalal Street is expected to see range-bound trading this week in the absence of any major trigger either on the domestic or global front, say analysts.

“Though the market has been moving up it seems to be running out of steam as the indices are still moving within a strong range,” according to broking house ICICI Direct.

“In terms of valuation and from the angle of risk-return trade-off also, the domestic market is looking slightly vulnerable and is likely to see some downward correction in the short-term,” it adds.

Despite the overall rise, the domestic market has been under-performing against most of its global peers including China, which has seen a 19% rise in the same time period.

“Investors are cautious and the market is likely to see a side-way trading this week,” said Bonanza Portfolio assistant vice-president for research Avinash Gupta.

Analysts further say, following the negative global cues, the market may open with negative bias on Monday, however, it may bounce back later on fund inflow.
“Tracking the weak US and European markets, Dalal Street may open with a negative bias on Monday. However, FIIs are still bullish about the India growth story and a sustained inflow will help the market to bounce-back,” said Geojit BNP Paribas research head Alex Mathews.Foreign Institutional Investors are positive on the domestic market and last week itself infused a net of `5,590 crore in local stocks, taking their total investment so far in 2010 to `51,185 crore as per the data with Sebi.

“Global parameters will be important to decide the direction of the domestic markets,” added Mr Mathews .

On the domestic front, the faster progress of the monsoon remains the key factor for the market. The IIP figures for June, which are due this week, will also be important and needs to be watched.

Domestic markets recovered during the past week and both indices made their fresh 2010 highs, as FIIs continued their buying spree. On a week-on-week basis, the Sensex went up by about 276 points, or 1.5%, to close at 18,143.99.

On Friday, Wall Street too settled in the red on sluggish jobs market data and unimpressive July retail sales figures. The Dow Jones lost 0.20% and S&P 500 ended 0.37% lower.

Mumbai: Valuations have been the big buzzword on Dalal Street for a while now but its suddenly gaining momentum. These days every conversation begins with the P/E ratio (price to earning ratio, which compares the current price of the share with its per share earnings) and ends with a loud proclamation that the valuations look ‘a bit stretched.’

However, many experts believe that looking at a ratio in isolation won’t help investors grasp the realities of the market and a higher valuation may not be the only deciding factor driving the market.

‘‘Valuations matter in the long run, but it need not have an impact in the short run. This is because there is never a right valuation for a stock, as it is a highly individual call,’’ says Mukesh Dedhia, director, Ghalla & Bhansali Securities.

‘‘For example, a stock with a higher P/E may be moving ahead further as there is greater demand for the stock because of its higher earnings possibility. So, there is always a bit of confusion about the right valuation,’’ he adds.

‘‘If you look at the broader market, it is difficult to get a value pick. But if you are doing a bottom up method, you would still find many stocks in the market with the right valuation,’’ says Rajiv Thakkar, CEO, Parag Parikh Financial Advisory Services. Though he is a firm believer of value investing, he says looking at a ratio alone won’t be the right way to investing in a stock.

‘‘There are many things you have to consider. For example, you have to find out whether the growth rate is sustainable or how much capital is required to keep the growth. Sometimes, there would be volume growth, but the margins could be under pressure. There are a host of issues to consider, just looking at a ratio is not enough,’’ he adds.
Some experts also believe that the higher valuations could be justified if foreign investors continue to pump money into the stock market with the hope of better performance by Indian companies.

‘‘The current valuations doesn’t justify the long term growth potential of India. The market is trading 17 times the earnings potential in 2011 and around 13.8 times the earnings forecast for 2012. It even carry a premium of around 50% to other emerging markets and around 25% premium to other global markets,’’ says Devendra Nevgi, Founder & Principal Partner, Delta Global Partners. He believes that the premium can be justified if the foreign investors continue to bet on Indian stocks.

The Nifty started Wednesday’s trade on a rather timid note. As the underlying index was quietly drifting downwards, the futures started trading at a deeper discount of nearly 10 points.

It was the last hour of trade that saw better volumes and a sharp movement. The fall amid global uncertainties has brought the Nifty once again to the level of 5400. Even the participation seems to be a little scared, as Nifty futures ended the day’s trade with an addition of over a million shares in open interest indicating creation of hedges.

As far as stock futures are concerned, we are very near to the highest-ever open interest with 195 crore shares in open interest. With nearly 70% of the stocks still trading with a premium, the bias among participants seems to be upwards. This would create a bit of pressure on the market in case of any macro uncertainty.

As we are almost half way through to expiry, it makes sense to continue with long positions, but along with long puts simultaneously so that losses are capped, still keeping all the upside open.

On the options side, Nifty August series open interest put-call ratio is at 1:58, indicating a moderately bullish composition. Even the implied volatilities element of the options which indicate the assumption of the risk remains very low. This indicates we may not see a huge downside as far as the August expiry is concerned. With over 10 million shares in 5300 August Put, the Nifty may find support around the level of 5300.

We feel one can do a Nifty bear ratio spread to hedge trading longs, by buying 1 lot Nifty August 5400 PE & selling 2 lots of Nifty August 5300 PE.
This strategy accrues profit within the 5200 & 5400 range in case the Nifty ends up in this range on expiry. On the event the Nifty heads upwards to close above 5400, one can still have a cash inflow and no cost of hedging. The strategy does incur loss below 5200, which we feel shall hold good for the August expiry.

(Bhavin Desai is Manager (derivatives), Motilal Oswal Securities )

Losing one of the greatest players in basketball history is never easy, much less finding a way to replace him. But after LeBron James’s departure for the Philadelphia 76ers closed an eight-season chapter of Los Angeles Lakers history, the franchise has used the summer to build a roster specifically constructed around its new centerpiece, Luka Doncic, entering his third season with the team.

James’s exit removed both a locker room leader and a player who averaged 20.9 points, 7.2 assists and 6.1 rebounds last season. The scale of that departure has fueled some skepticism about the Lakers’ ability to compete among the NBA’s best teams this coming season, particularly given that several of the team’s new additions are either coming off injury-plagued campaigns or remain unproven in significant roles. Even so, an examination of the full roster suggests the Lakers have emerged from the offseason younger, deeper and better equipped to complement Doncic’s game than at any point since he first arrived in Los Angeles.

The most important move of the Lakers’ offseason was retaining guard Austin Reaves, who signed a four-year, $180 million contract, the largest deal in league history for a player who went undrafted. Reaves averaged a career-high 23.3 points across 51 games last season, making his return as a secondary scoring option alongside Doncic a clear organizational priority heading into the summer.

The Lakers’ most significant outside addition came through a sign-and-trade acquisition of center Walker Kessler from the Utah Jazz, followed by a four-year, $130 million contract extension for the 25-year-old, 7-foot-2 big man. The move gave Doncic the kind of high-level starting center he had reportedly been seeking. Kessler led the NBA in offensive rebounding rate and offensive rebounds per game, at 4.6 per contest, during the 2024-25 season, and has consistently ranked among the league’s shot-blocking leaders when he has stayed healthy, averaging 2.4 blocks per game in both the 2023-24 and 2024-25 seasons.

The price Los Angeles paid to acquire Kessler was substantial. The Lakers sent Utah unprotected first-round draft picks in both 2031 and 2033, along with first-round pick swaps in 2028 and 2030, a package reflecting how central Kessler is expected to be to the team’s long-term plans around Doncic.

Beyond Reaves and Kessler, the Lakers added scoring guards Collin Sexton and Quentin Grimes to round out the backcourt. Sexton, who averaged 15.4 points last season, brings an energetic playing style that has historically resonated with fans, while Grimes, who averaged 13.4 points last season in Philadelphia, offers two-way versatility and prior experience playing alongside Doncic. Forward Sandro Mamukelashvili represents a potentially underrated addition who could see significant minutes either in the starting lineup or as a small-ball five off the bench under head coach JJ Redick. Guard Jaden Hardy, acquired via a trade that sent center Deandre Ayton to Utah as part of the Kessler deal, adds another young scoring option with prior experience playing alongside Doncic.

The Lakers rounded out their roster with a series of lower-cost contracts aimed at established veterans who could provide depth and specific skill sets. Kevon Looney brings championship experience and rebounding depth behind Kessler at center. Matisse Thybulle, an All-Defensive selection who has developed into an effective three-point shooter, having connected on 41% of his attempts from beyond the arc over his past two seasons in Portland, gives the Lakers a disruptive perimeter defender. Forward Ziaire Williams, who averaged 10.2 points last season in Brooklyn, adds size and athleticism on the wing.

Not every addition is guaranteed to pan out, and the Lakers still face several roster questions heading into training camp. The team currently carries 16 players on its roster and must trim that number to 15 before opening night. Depth at backup center behind Kessler could also become a concern if he struggles to stay healthy over the course of the season, given his injury history.

Even accounting for those uncertainties, the Lakers have done considerably more this offseason than simply replace a recognizable name with new personnel. The roster now features a collection of players capable of defending, running the floor, shooting and finishing scoring opportunities that Doncic creates for his teammates, a structural fit that had not fully existed around him during his previous two seasons with the team.

The Lakers’ investment in younger talent has also drawn attention during the offseason. First-round draft pick Cameron Carr had a promising Summer League showing, averaging 18.0 points per game, while two-way player Arthur Kaluma emerged as the team’s leading scorer during Summer League play, helping him secure a roster spot heading into the regular season.

The Lakers’ complete offseason roster turnover has brought in eight new players to the team so far. While legitimate risks remain given the number of unproven or recently injured additions, the organization has articulated a clear plan for the first time since Doncic’s arrival: building a roster specifically designed to grow around him rather than around a departing veteran star. That shift alone is likely to make the coming season one of the more closely watched stretches of Lakers basketball in recent years, as the franchise tests whether its retooled roster can translate into meaningful on-court success behind Doncic’s leadership.

Indian funds have grabbed seven out of the top 10 spots in the league table of leading small-cap funds across Asia, thanks to some canny stock-picking amid growing investor appetite for cheap stocks with potential to deliver multi-bagger returns.

An analysis of nearly 300 Asian small-cap schemes shows DSP BlackRock Micro Cap Fund leading the charge, delivering an 82% return over the past year. Managed by Vinit Sambre, who has been with DSP BlackRock for a little over three years, this fund has also soundly beaten the 58% rise of BSE’s Small-Cap Index since August 2009. The 30-share benchmark Sensex has gained 20% during this period while the wider BSE 500 Index is up 27%.

The other six schemes — Sundaram BNP Paribas Select Small Cap, HSBC Small Cap, JPMorgan Smaller Companies, Franklin India Prima, Franklin India Smaller Companies and ING Vysya CUB — have given investors returns between 44% and 57% on a trailing 12-month basis. These schemes manage anywhere between `46 crore and `954 crore.

Four of these funds were launched during the peak of the previous bull run between January 2007 and March 2008, and investors in them have also had to endure a massive erosion in their initial investment in the downturn that followed.

Mutual fund tracking firm Value Research called the DSP fund as an impressive product in the entire “small-cap universe”, noting that the stocks held by it were “credible, known names and there is a marked absence of momentum in the portfolio”. The fund’s holding includes companies with a high return on equity and strong leadership niches in their industries.

Value Research CEO Dhirendra Kumar said the closed-ended nature of some of these funds helped them weather the market turbulence. “These funds did not face redemption pressures through the declining phase. This, in turn helped them invest for the longer term,” he said.The DSP fund became open-ended in June this year and fund manager Mr Sambre has kept nearly 10% of his `311-crore corpus in cash to meet potential redemptions and to latch onto any opportunity in the market.

There are 10 small-cap funds in India, which manage roughly `3,450 crore in stocks. These account for just 2% of the total AUM under equity schemes.

Market experts say that as many large-cap stocks became fully priced and relatively unattractive over the past year, the rally shifted to small caps. Stocks such as cooler maker Symphony and luggage maker VIP Industries have led the small-cap charge in the market. Ahmedabad-based Symphony has surged 830% while VIP has risen 548% in the past 12 months. In comparison, top two gainers on the Sensex — Tata Motors and Tata Consultancy Services — are up 135% and 61%, respectively.

“Many small caps with excellent businesses were trading at a pathetically low valuations — many were trading below book value and at dividend yields of 5-7%,” says Deven Choksey, chief executive officer at KR Choksey Shares & Securities. “They just got purchased heavily.”

Even though small-cap funds have delivered solid returns in the past one year, experts say that investors must be cautious and have just 10-15% of their equity exposure in such funds or companies. This is largely because of the volatile nature of their stock performance.

“Investors should have a strong stomach and the ability to

withstand substantial declines in such funds,” says Mr Kumar at Value Research.

A wild black bear roaming through suburban neighborhoods in North Shelby County, Alabama, has become a social media sensation this week, drawing widespread attention as photos and videos captured the animal casually passing homes, peering into yards and clearing fences as though scouting real estate.

Posts documenting the bear’s movements began circulating rapidly among residents earlier this week, according to local outlet Bham Now. As the animal made its way along neighborhood streets, residents shared real-time photos and videos of its journey, contributing to the widespread online attention the sighting has generated.

Black bears once ranged widely across Alabama, but their numbers dropped sharply over the course of the state’s history due to habitat loss and hunting pressure. In 2006, the black bear was officially designated as Alabama’s state mammal, according to Bham Now, a symbolic recognition that came even as the species’ population remained heavily concentrated in just a few pockets of the state, primarily near Little River Canyon and Lookout Mountain in northeastern Alabama, as well as in the Mobile and Washington County area in the state’s southwest.

Conservation efforts led by the Alabama Department of Conservation and Natural Resources have helped the state’s black bear population gradually grow in recent years. That recovery has come with a notable behavioral pattern among young male bears specifically: according to Bham Now, male bears, particularly younger individuals, may roam as far as 100 miles from their dens in North Alabama during the summer months in search of new territory, a pattern that could help explain how a bear ended up wandering through the Birmingham suburbs, well outside the species’ core habitat range.

The sighting reflects a broader dynamic playing out across parts of the country as wildlife populations recover and human development continues expanding into or near natural habitats. As black bear populations and other wildlife rebound in various regions, animals are increasingly likely to move through residential neighborhoods that have been built near their habitats or along established travel corridors the animals have historically used to move between territories.

Human activity within those neighborhoods can also increase the likelihood of these kinds of encounters. Easily accessible food sources, including unsecured household trash, outdoor pet food left in yards, and bird seed placed in feeders, can draw bears into residential areas and, over time, teach the animals to associate proximity to people and homes with a reliable food source, making them more likely to linger near neighborhoods rather than moving through quickly.

That dynamic creates risks for both residents and the bears themselves. A bear wandering through a residential subdivision can raise immediate safety concerns for nearby residents, disrupt normal daily routines, and put both pets and people at risk of an unwanted encounter. For the bear, extended time spent near roads, fences and homes similarly increases the likelihood of vehicle collisions, physical injury, elevated stress, or other dangerous conflicts with people or domestic animals that the bear would not typically encounter within its natural habitat.

State wildlife officials have offered clear guidance for residents who encounter a bear in their neighborhood. According to guidance summarized by Bham Now, people should leave bears alone entirely, maintaining a safe distance and never attempting to feed or touch the animal under any circumstances. Officials have specifically warned that feeding bears, even unintentionally through unsecured food sources, can make future encounters more dangerous over time by conditioning the animals to associate human presence with an easy meal, a behavioral shift that tends to make bears bolder and less likely to avoid populated areas on their own.

Residents in areas where bears have been spotted can take several practical steps to reduce the likelihood of repeat visits from the same or other animals. Securing garbage in bear-resistant containers or storing it indoors until collection day, bringing outdoor pet food inside rather than leaving it accessible overnight, and removing other potential attractants such as unsecured bird feeders from yards can all help discourage bears from lingering in residential areas. If a bear is actively present nearby, residents are advised to supervise any pets closely and give the animal a clear, unobstructed path to move on, since cornering or startling a bear increases the risk of a tense or dangerous encounter for both the animal and any nearby people or pets.

Wildlife officials in Alabama and other states with recovering bear populations have increasingly emphasized public education around these kinds of encounters as black bear numbers continue rebounding in regions where the species had previously become rare or locally absent. As development continues to expand into or near areas bears use for seasonal movement, particularly during the summer dispersal period when young males often travel long distances from their home territory, wildlife officials expect similar sightings to continue occurring periodically in suburban and semi-rural communities located near the state’s core bear habitat zones.

For now, the North Shelby County bear appears to have simply been passing through, continuing what wildlife experts describe as a natural seasonal pattern of long-distance roaming among young male bears, even as its brief visit to the neighborhood turned it into an unexpected online sensation among residents who documented its unusual, homebuyer-like tour of the area.