Archives of what I wrote in The Economic Revolution - 13th dec 2008 till 14th feb 2009

14th february 2009

Dow move of last Friday - promised a lot but failed to deliver a follow-up. In fact, the Dow ended the week giving the lowest weekly close in this bear run. This has changed all calculations and all prognosis of a medium term rally in our market. The bulls are holding on hoping for the lifeline that the interim budget may throw at them. This has enabled them to sustain the 2 % IIP fall which was accurately predicted by me a day before.

As mentioned last week our market has started showing a lot of maturity in reacting to strong Dow nos (good news ) and disastrous IIP nos ( bad news ). Alas, if same maturity was shown 15/18 months back ….. we would not have so many sob stories of boom to bust to hear.

Monday becomes a very important trading day of the next week. It will set the tone depending on the outcome of the budget speech of Pranabda. The old warhorse will be singing his swansong in front of packed parliament and multi-million TV audience – an opportunity he would have never thought possible to come his way. He will make the most of it with lot of election pointing rhetoric but not much substance.

So the bulls are bound to feel let down and then wind-down positions which will have its inevitable effect of starting a slide down. I hope the slope will be gradual and not off-the-cliff type. I will recommend to open fresh shorts on Monday morning prior to budget and wait ……..

The macroeconomic factors and the election jitters are bound to come forward in full force this week. Let us wait and watch ……

7th february 2009

Dow has made a 200 plus points up-move on Friday – the last trading day of the week. This is bound to have a big positive impact on our markets when they open for trading on Monday. But HOW MUCH is the big question …. It is entirely possible that we will have a fresh rally starting after the break-out from a tight trading range – that will be a normal response.

I feel that this time the market is more rational than euphoric and it will try to gauge the durability of the Dow up-move before it makes a decisive move.

We have to cut shorts and become neutral to get ready to latch on to 300/400 nifty point rally which may happen if Dow continues its march to 8400 and beyond.

Our own macro-economic problems are far from over and the forthcoming elections can give jitters till we have the next government in place. Then the contours of the coalition will take over.

So be ready for a small trading rally for short to short-medium term which is a period of about 2/3 weeks – max 4 weeks.


31st anuary 2009

We are moving in a very tight range and breakout is imminent - the direction is not known – that is the problem ? ? ?

Let us try to find a logical answer – 1…. Euphoria about Obama is over. Real economic worries are coming to the fore. 2… Result season is over – in India as well as USA. 3… Dates for our general elections are getting announced shortly – that anxiety can now take over.

Dow is at a cusp / inflection point – a decisive break below 8,000 can be extremely damaging. The overall results are in line and the big boys have done better than expected. Normally this should have given a big UPSIDE to the market but in the prevailing sentiment it is read as WORST IS YET TO COME. The election fever has started to set in and as of now, there is not even clarity about pre-election coalitions.

Generally situation is in a flux and right for a downside breakout testing the intermediate November low of 2500 or thereabouts.

24th january 2009

I am on the road and very busy - so much that I could not keep track of the market for last 3 trading session.

17th january 2009

Last week was a drab – on the face of it but we had 100/120 point nifty moves in either direction on last three days pointing to increased volatility. This does not augur well. To me, it looks like a desperate attempt by bulls to defend some key levels below which all hell will break loose.

Infosys has given results which were not disappointing but TCS results were sounding a note of caution. US results have been poor and banks are worrisome. We may have a next downleg commencing after euphoria about Obama’s coronation is over.

As I have been saying all thru, the economic problems the world has are beyond any single individual – even though he is US president – as they are systemic in nature and only natural cleansing process will unravel them.

Natural gas prices have caught a downward momentum – two / three more down weeks and both RIL / RNRL will be wondering why they are fighting. Time is a natural healer – right . . . ! ! !

Commodities are again looking down after a brief attempt to recover. Commodity stocks should catch chill again.

The old adage - CASH IS KING – comes to mind again …. Hold on to it for dear life . . .

10th january 2009

Last week was a tumultuous week. Everything looked better at the beginning – the global cues were much better compared to last several weeks and we were midst of a sweet pullback – but who knew about the SATYAM debacle . . . ! ! !

Then everything turned topsy-turvy and the basic trust in the ‘corporate governance’ itself was shattered. The de-rating was all pervasive and many dubious quality stocks took big knocks.

Some rumours are swirling about big-daddy RELIANCE and if there is any credence to it, we are doomed to see much lower levels. GRMs are slated to shrink drastically and the bottom-line will be affected.

Infosys / TCS will announce results next week and not much positive is expected but we should pray not to have any nasty negatives, otherwise that sector – which is an underperformer over a year now – will simply collapse.

Looks like we are going to have a very eventful and volatile week ahead . . .

20th december 2008

Last week, as expected, market did show positive bias in the wake of expectation of proactive government response. The sentiment was further aided by lower than expected inflation figure on Thursday. This has given rise to further rate cut hopes and this has given filipp to the sentiment to banking stocks and heavily beaten down real estate sector.
We have already entered into new year holiday zone and not much can be expected from FII front for next two weeks. This means as usual our operators will rule the roost and the ‘momentum brigade’ should thrive. In fact, I think that has already started.
Don’t get sucked into thinking that these are good times for investing short term in these stocks as levels have moved up. Aggressive and nimble footed traders only can grab these extreme sharp, short term but volatile price movements.
US markets have hardly moved over last two weeks and breakout seems imminent in the early in the new year. Unfortunately the direction can not be judged now. All will depend upon the fallout of the Madoff scandal.
I will be away for next two weeks and will be back with you on 10th January 2009.

13th december 2008

Last week, as expected, we saw a very muted response to ‘stimulus’ package in the beginning of the week but the market showed remarkable resilience towards the end of the week inspite of adverse newsflow by way of US news and disastrous IIP nos.

My analysis for this resilience is as follows - many a times a person gets bogged down in the web of his own utterances in the past …. I am referring to Chiddu as I see every possibility of his getting trapped into matters like FRBM / his stand on SEZs etc. Market has sensed that the finance ministry will now have no such hang-ups since it is directly under PM. That is why market is now expecting a more proactive role by finance ministry. No doubt, recent state election results have also improved the sentiment.

I also told you last week something about Chiddu and real estate lobby ….. just have a look at the performance of realty stocks after departure of Chiddu and I will not have to say anything further.

This raises another important point – if a senior cabinet minister can be manipulated and moved around by some not so influential industry groups, how do you expect other lesser mortals like government babus to withstand the pressure ? ? ? We always tend to blame the babus for everything that goes wrong but at times, they may have no choice …….

US markets have been ambivalent for the last week as well. 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.

I still maintain that CASH IS KING but it may be prudent to trade with a long bias till our position trading short level is decisively broken.