Alpha Ideas

Global liquidity seems to be the reason all these relationships are breaking down. With negative rates pervasive across sovereign markets, this is also changing across asset relationships. The markets seem to no longer be heterogenous, everyone is on the same side and looking at the same central bank put, playing the short-term liquidity. Without heterogeneity in markets, short term liquidity overpowers everything else.

With all these relationships breaking down it is no surprise that many investors are confused, doing badly and very worried. I have very rarely seen so many top quality investors all so bearish, across all asset classes, at the same time. Whether it be Soros, Druckenmiller, Singer or others, most of the people with really good long-term records are asking you to exit the markets entirely.

As is typical, markets will keep us guessing, and test the conviction of the bears. I would not be surprised to see continued market gains globally driven by the liquidity. However, be rest assured, this will end badly, and when it does no-one will have time to react. The prudent thing would be to slowly take risk off the table, knowing that one may hurt returns in the short term, but preserve capital for the inevitable bust. If you are a global investor, the responsible thing to do is cut risk and raise cash, no matter how painful it may be in the short term.

India is in a structural bull market, but will also correct if global markets turn turtle. Any correction in India remains a buying opportunity.-wrote Akash Prakash,Amansa Capital