Archives of what I wrote in The Economic Revolution

6th December 2008

Last week, the news-flow regarding ‘stimulus’ package - both monetary / fiscal – kept the pot boiling. As I write, we have got one percent cut in repo and reverse repo rate from RBI with no changes in SLR / CRR. I think this may be just short of market expectation. We will see a rather muted response next week unless we have some BIG surprises in fiscal package.

Another important development was Chiddu leaving finance ministry. Chiddu was the architect of this mother of all bull runs and now he is no more to fight the proxy battle for the bulls. I had sensed that something was amiss between real estate honchos and finance ministry for last couple of months and ‘builder’s lobby’ has finally managed to shunt Chiddu out. He himself made known his ‘disinclination’ for home ministry. Now he has all the power but ……

US markets have been ambivalent for the last week and the investors seem to be hoping Obama to wield a magic wand when he takes over. I think the problems are beyond any single person to make any substantive difference. Shanghai and Hong Kong markets are looking promising but I expect some nasty surprises to come from UK / Europe in coming few months.

We have traded last week in a very tight range of 150 nifty points with attempted breakouts – one each – on either side. A clear break-out can give a 150 points sharp move and then we have to wait further signal for continuation of the move. I will prefer to trade in options in such a scenario with a lower bias.

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.


29th November 2008

Last week, we saw most dastardly attack on Mumbai by terrorists. The modus operandi gives an indication of involvement of AL-QAIDA. We have never seen direct involvement of this most dreaded terror outfit in any of the earlier terrorist strikes in India. This will raise certain doubts in the minds of international investment community further delaying the recovery on Indian bourses.

US markets have posted straight five gains from sub-7500 level hit last week. Some correction is now on the cards and resonance in Asian markets will be obvious.

All financials in US markets are trading much lower than the levels prevailing when TARP bailout was announced and that shows no conviction from investors. Something similar is brewing in our markets too. SBI may be the stock to watch as it can easily slide 10/15 % lower from current levels pulling down the whole banking sector.

We have traded last week in a very tight range of 150 nifty points and a break-out on either side can give a 150 points sharp move and further signal for continuation of the move. I will prefer to trade in options in such a scenario with a lower bias.

There is absolutely no point to look for investment opportunities in such a highly volatile market – at best you can take a trading long position somewhere midway into the rally - there is no way you can enter at the beginning as the move is so swift - and try to exit at decent profit of 5 to 7 %. A STRICT / TIGHT STOPLOSS is the order of the day.

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.


22nd November 2008

Last week, all three US indices posted new lows – lower than October 10th lows which were considered as impregnable just a few weeks ago. Everyone had a feeling that 10th October was an aberration –but it was not to be so. Some European indices also gave new lows and most of the asian indices also moved perilously close to those October levels.

The intermittent rallies are sharp but they are sold into so savagely that I get a feeling that these are orchestrated or stage-managed by wily bears so that they get better levels to sell into.

There is absolutely no point to look for investment opportunities in such a highly volatile market – at best you can take a trading long position somewhere midway into the rally - there is no way you can enter at the beginning as the move is so swift - and try to exit at decent profit of 5 to 7 %. A STRICT / TIGHT STOPLOSS is the order of the day.

Indian banking industry – along with capital goods – was forerunner of the mother of all rallies from May 2003/ January 2008. Capital goods are distinct underperformers already now and banking is going to have horrendous time in the next few quarters. Keep that in mind for sure.

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.