Warren Buffet, the legendary investor of our times, has declared that the worst ever financial crises that gripped the world markets last year is behind us. And he has enough reasons to beleive so. US economy has shown positive growth in the 3rd quarter of this year, after four consecutive quarters of negative growth. The Eurozone has also come out of recession in the 3rd quarter, the 16 nations comprising the Eurozone reported a combined GDP growth of 0.4%. However, a sliding US Dollar poses a serious threat to the Eurozone recovery (The dollar has slipped 18% against the Euro in the last quarter). It is not a time to rejoice yet as the recovery is mainly on account of the support from Govt. stimulus packages and temporary inventory effects.
However, CHINDIA (China and India), continue to lead the global economic revival. As per the current IMF forecasts for global economic growth, China and India together would account for 14.5% of the world’s GDP by 2014 at market exchange rates and 21% in PPP terms. Their current share is around 9% of world's GDP. The 3rd quarter GDP growth for China has been an impressive 8.9%. In October '09 China's manufacturing index recorded the highest growth in last 18 months. India's IIP growth at 9.1% for September '09 has been better than the analysts' expectation. India is on course to record a GDP growth of 6.5-7% for this fiscal. The Govt. is seriously devising measures to reign in the widening fiscal deficit. One such measure is to spend money raised from PSU divestment to create assets for the social sector.
These positive developments have lead to a strong revival in global equity markets. The risk appetite of investors has improved due to the positive announcements. Although ahead of fundamentals, the markets are reflecting the positive sentiments expressed by investors like Warren Buffet. From now on, any dip in the markets will be an opportunity to add equity investments to one's portfolio.
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