archives of what i wrote in The Economic Revolution

15th november 2008

We had a truncated week – 4 day trading week and Monday was a 6 % plus day. Inspite of that we managed to close the week 5 % down. That shows that what I had stated about not being convinced about the upmove is absolutely correct. FIIs have resumed selling as expected and retail investors are running helter-skelter for cover.

G 20 meeting over the weekend holds the key – it seems. But I am very skeptical about any kind of monetary or fiscal stimulus that the government may announce as per commitments made at G 20 meet.

Our economy is plagued by short term foreign currency debt raised by corporates – in the form of ECBs and FCCBs - and white sharks are lurking to pounce when huge repayments have to be made over the next 8 months upto mid 2009 putting severe pressure on foreign exchange reserves and correspondingly the exchange rate.

I am looking at a rather grim 2009 and must state that CASH IS ABSOLUTELY KING.

I feel the 27th October lows may hold in the short term but in the medium term we are bound to seek new lows and much lower lows.

8th november 2008

The rally fizzled out midweek - in US as well as in our markets – and is again trying to gather some steam by end of the week. I am not convinced about the strength of the up-move. FII selling seems to have tapered down but it can resume any day and we will start to slide again.

One thing came out of things that have happened in the last ten days. RBI seems to have lost its independence and now it can be called as a wing of the finance ministry. The writing was on the wall when Dr Reddy was not given the extension and he was replaced by a secretary in the finance ministry. The current FM wants to go out on a high and he needed a ‘pliant’ RBI governor which he has got now.

WILL IT BE A TURN OF SEBI NEXT ? ? ?

1st november 2008

The preceding two weeks have seen a major upheaval in Indian markets. It was inconceivable at the beginning of the month that we will see a drop of 45 % at index level. I was predicting levels of 2550/2700 but these levels came rather too soon and even surpassed.

We have seen a rather strong SEBI / RBI intervention over the weekend and we should cross 3000 level on nifty on Monday. The moot point is that whether we can hold these levels with any conviction if FII selling continues unabated.

I have a strong feeling that lows of last Monday – 27th October will hold as bottom for some time to come. But the point is that we have moved up rather sharply and including the coming Mondays gain, we would have moved nearly 40 % from the 27th October low. This will be unsustainable and we will give up half of those gains which will again take us to 2550/2700 levels. From there-on the recovery can start in the right earnest.

18th october 2008

The world markets seem to have started stabilizing although intraday volatility is still high. This volatility must subside considerably before we can talk of any short term / midterm bottom.

Our markets are still in a ‘strong sell’ mode as new lows are being made virtually every day. There has been a major downward shift in earnings expectations for the next four quarters and that is casting a dark shadow on our markets along with continuous selling by FIIs. .

This week we may have some bounce … and a pronounced one … if SEBI takes some action about lending of stocks by P-note holders. This bounce should be used to exit longs as the sellers can / will find some other way to continue ‘shorts’.

We are going to see 2550/2700 nifty levels in the coming months so don’t go overboard with your buy orders …. Keep looking at value …. just forget momentum ….. it is a ‘bad’ word in existing scenario …. Remember the analogy of sharing a rescue boat with an elephant ……

11th october 2008

Mayhem that we have seen last week around the world markets have not been witnessed since the great depression of 1930s. In 1987 October, when black Friday occurred, the world markets were not so well integrated that echoes will be heard in every nook and corner.

Last week, I had mentioned that look at the global markets as our markets will simply replicate whatever happens there asides a small show of strength from time to time which will be sold into.

This week we may have some stability and a small bounce …. Not more than 5 to 7 % …. Can not be ruled out …… we r going to see 2550/2700 nifty levels in the coming months so don’t go overboard with your buy orders …. Keep looking at value …. just forget momentum ….. it is a ‘bad’ word in existing scenario …. Remember the analogy of sharing a rescue boat with an elephant ……

4th october 2008

A tweaked bailout package was finally cleared by US senate and congress. The Wall street was not enthused and greeted same by closing approx 450 points lower than days high … overall the week was bad for US market …. Closing with major losses over the week …… I am dwelling so much on US markets because that is the single most factor to which the world markets are rhyming …. Remember the analogy of sharing a rescue boat with an elephant ……

27th september 2008

As expected US rally lost steam midweek and echoes were heard on wall street. It is expected that the bail-out package will be cleared by the US congress by Sunday evening and details must be available bt Monday morning before asian markets open – it is widely expected that the asian markets will tank if no deal is announced by then.

20th september 2008

Finally US govt has acted accepting that desperate situations need desperate measures. Short sales are banned in US and UK triggering a massive short covering rally. This week, US govt will also declare a massive bailout programme buy taking over all bad loans on their books. This means institutions hv to take onetime BIG BIG writedowns. We will watch very closely future developments but this rally also should peter out soon.