Archives of what I wrote in The Economic Revolution - 21st feb and 28th feb 2009

28th February 2009

Pranabda is nothing less than an Indian magician. On Monday, 16th February he refused to oblige the Indian corporate sector with any mercy under the guise of propriety but come Thursday the 26th, all that mask melted as butter melts in the hot sun. We had fresh excise and service tax cuts and a small dose of incentives to exporters on Friday.

The quarterly GDP figure of 5.3 % is in-fact better than my expectation and we must be ready to face even worst figures in the coming quarters. I say this in-spite of some popular charitable views declaring this figure of 5.3 % as the worst that we have seen.

What we are facing today is crisis of confidence and unless that is restored all these dollops of thousands of crores of rupees will vanish in the proverbial black hole with nothing to show.

Yesterday, we had all three US indices – the Dow / Nasdaq and S&P closing at a new 52 week weekly closing lows. We are staring at 6,000 on Dow and 600 on S&P and that is not a good feeling. This does not give any confidence whatsoever to trade on the long side and I must repeat over and over again that all bounces must be used to exit longs.

RIL / RPL merger is announced and we will know the details like exchange ratio etc on Monday. I have some views on this matter which I will keep reserved for the time being and they will be published at an appropriate time. I can only say that I am not very sanguine about the prospects of the merged entity.

If Dow is going to 6,000 which is the next plausible target, we should be looking at 2,000 / 2,100 as possible nifty level. So all ULIP investors are better off switching to debt funds till this downslide has played out. MF investors hv to step aside and wait. I had given similar warning when nifty broke 3,550 early October and what followed is history.




21st February 2009

As expected, Pranabda’s interim budget was a non-event and the bulls have finally thrown in the towel and now they are at the mercy of the bears. The bears are still pulling their punches in view of the Monday - trading holiday in India – and will make the assault on Tuesday if the Dow is with them.

As I write the Dow has given a weekly close well below 7500. This now opens the gates for further substantial downside. It may happen over next 10 days or 10 weeks is anybodies guess but there are now more than 80 % chances that we will make firm downside move in the coming weeks and months. There may be sharp short term rallies but they will fizzle out even before average investor / trader can get in.

If Dow is going to 6,000 which is the next plausible target, we should be looking at 2,000 / 2,100 as possible nifty level. So all ULIP investors are better off switching to debt funds till this downslide has played out. MF investors hv to step aside and wait. I had given similar warning when nifty broke 3,550 early October and what followed is history.

Please remember CAPITAL is always scarce no matter what you are and we must learn to respect it. That means you must learn to preserve it at all costs.

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