The current Nasdaq fall is more worrying than the dotcom crash: Geosphere’s Arvind Sanger

Arvind Sanger said that they are being cautious, keeping cash.

“I would say this (fall) is a little more worrying than what was in the dotcom bubble,” he said in an interview with CNBC-TV18.

“The companies that are falling aren’t the pets.com kind of companies that vanished. The ones falling today may have been market leaders for a decade and above, in a very meaningful way, and therefore the effect (of their fall) on the real economy and markets is more profound. There is higher risk of secondary and more at risk than consumer spending, and other negative secondary effects, such as on consumer spending,” he said.

He compared the market to a “slow moving train wreck”.

Government action is adding further risk to the market, according to him.

“We are staying very cautious. Keeping cash and powder dry till we get clarity,” he said. That said, he isn’t dismissing buying opportunities here and from these sell offs. In India, they are looking at stocks that have been badly hit because of policy action, like in steel from the export duty increase. “Some of these will start to get attractive because we still believe there is a long upcycle coming. The Indian economy is going to grow and things will come back and some of these sectors have long-term fundamentals that we like. So we are looking at these sectors that are getting hammered like the steel sector and are looking for judicious opportunities here,” he said.

Different governments’ actions to protect their domestic economies from inflation is driving up global inflation, he pointed out.

“The biggest risk, and people are underestimating it, is what the Indian government did. They increased export duties on steel and iron ore, which means Indian consumers may benefit but global steel prices will go up. On the other hand, the government cut excise duty on petroleum products, which means crude oil prices globally will go up because Indian demand will be stronger. So you are creating all these (inflationary) forces,” he said. The Indian government’s actions are part of a global trend.

The Indonesian government limited palm-oil and coal exports to curb domestic inflation. “Everybody is doing these competitively, taking care of their inflation from what they are surplus in and stopping exports of something somebody else is deficient in. This is going to create global friction, which creates global inflation because everybody is beggaring everybody else while trying to help themselves,” he said.