Long & Short of Markets: Why is Jim Rogers bullish yet cautious on the commodity rally?

Commodity stocks have a peculiar problem. You have to be right twice – once while buying and then again while selling. The door gets too crowded when it’s the time to make an exit. So is it the right time to sell commodity stocks or is it going to be a multi-year play? In this weekend’s edition of ‘Long & Short of Markets’, read what investment guru Jim Rogers has to say on the commodities rally, how fund managers are using export theme as a hedge against domestic slowdown and how sugar stocks are converting from cyclicals to structural stories.

What’s the secret of this resilience?
Dalal Street fund manager ArunaGiri N opines that opportunities for alpha generators in the broader market are back in favour as a strong recovery is in the offing despite a slowdown threat from Covid 2.0. If resilience in the smallcap space in spite of scary headlines on Covid 2.0 is anything to go by, the market is on course for a major breakout, especially in the broader segments, he says.
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Export theme to hegde domestic slowdown
With the second wave of Covid hitting domestic market facing sectors the most, mutual funds are already taking action on this front by reducing their weightage in the domestic consumption economy. As western countries and other emerging markets are reopening, the outlook for export-oriented companies appears to be very bright.
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Tip for commodity traders
While legendary investor Jim Rogers believes that commodities remain one of the cheapest asset classes right now despite a considerable run-up in prices, he warns of a correction in the short-term. He says that anything that has run up straight has to come down, irrespective of fundamentals.
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Achilles’
heel

As far as the rally in commodities is concerned, what matters is inflation in China and not in India, opines market expert Rakesh Arora in this interview. If inflation picks up in China, then the Chinese government is going to pull back on the stimulus and we might see dips of 20-30 per cent or even more in commodity prices, he says.
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Sugar stocks to turn perennial sweeteners
Thanks to the government’s push on increasing ethanol blending in petrol, sugar stocks may soon convert from being cyclicals to structural plays. Ethanol is providing a stable cash flow to sugar mills and is also a higher ROC business.
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