Well, the primary concern is how will things shape up for an emerging country like India. As mentioned earlier as well, in the short and medium term, there is no way India can escape the financial tsunami that is impending. I keep repeating the following point to show that I am only human and am prone to errors of judgement. My call was a new high on Nifty before bending backwards which had 3 conditions; 5408 to hold until 10th-12th August, 5532 to be achieved by mid-September and 5944 to be achieved by mid-October. 2 out of 3 knocked off and given the way Nifty spot is today and the undercurrents that are playing out, we are almost certain of retesting the 4690-4720 levels within the next 45 trading sessions. My initial hypothesis was that if Nifty could hold its head above 5408-5532 levels and make that attempt to take out 5944 in April, we would see 4800 by mid-2012 and if we fail to take out 5944 in mid-Oct, the 4800 levels would probably come around Feb/Mar '12 itself. Both Aug/Sep time and price targets were taken out in a jiffy to the downside and we also hit 4720 on 26th August 2011. The pullback so far has been remarkable but now, for the very short term, action on Nifty would depend on how the retest of 4690-4720 levels shape out.
If we do manage to salvage the wrath of bears over there, then there will be some calm and in case of further carnage, the 2 critical levels are 4450 and 3850. As of now, even in the worst eventuality, I would expect some value buying to come in from a broader segment of people and institutions [given that retail participation in stocks is pretty low in India] and turnaround smartly within 3850 maximum to the downside. Already there is a lot of fear on the bourses and in the 3850-4400 zone, the fear will be excessive to the extent that even trading in Nifty futures and options will go for a toss unlike now where it is just equities that are seeing low volumes. Below 3850, we have to be vigilant and get ready for one more pook at the same levels we had in October 2008. At sub 3k levels, Nifty melted over 250 points and then closed marginally below open at 2525 levels [the low of the day was 2250 odd points]. I did not follow the capital markets at that time and hence what I have with me is just the OHLC chart of the day. I don't personally think we will drop so much and am relatively confident that we won't close below 2525 even in these bear market conditions.
In case we do see these sub-3k and 3k levels on Nifty, I am going to go shopping for as many Nifty Bees I can for sure. It could not get better for me than hunt for assets, evaluate the cash flow models of any stock in Public or Private Equity to get the alpha on my personal portfolio. I am not a CFA but know enough about business metrics to evaluate the proposals brought on by any guy wearing an Armani suit and laying out some spreadsheets to show me how the investment in a venture is going to be. I am a strong opponent of Private Equity [the only thing I like about Private Equity is that it does not subject a business leader to lay out quarterly plans and get the stock price hammered for no reason on the bourses and of course does not keep any shares outstanding for speculation on the exchange. A vast majority of Private Equity deals are nothing but financial engineering of debt and creating alpha by tax shields. It is just a dignified way of setting up IPOs on the bourses that come with a roar on opening bell and then melt down over 80%].
With elections impending in 2014, regardless of where we fall on Nifty, 2014 is certain to bring cheer on the bourses. Even in the grim business scenario, we have enough domestic consumption that a minimum of 6% GDP growth is assured. If the global meltdown indeed comes through as indicated by blogosfears, yet again India and China will be rewarded by smart money. Moreover, if the Indian people start consuming cheap produces from their western counterparts, there will be capital inflows into the country. In due course of time, depending on how much badgering Nifty goes through, I will put my recommendations in here.
For now, the key levels are 4690-4720 and we need to keep a close eye on that. In all likelihood, with a few whipsaws up and down, we will end Sep series from the point where we started. Until then, we need to remind ourselves that Cash is King. Traders should use rallies on Nifty to go short but as indicated in the EOD Analysis on Friday, in a staggered manner with a hawk eye on 5196 levels. If we close above 5196 levels on Nifty, there might be a pleasant rally from the wounded bulls all the way to 5496 levels [Probability is less than 1%!!!]
Watch out for the Great Indian Banking Paradox coming up tonight.
If we do manage to salvage the wrath of bears over there, then there will be some calm and in case of further carnage, the 2 critical levels are 4450 and 3850. As of now, even in the worst eventuality, I would expect some value buying to come in from a broader segment of people and institutions [given that retail participation in stocks is pretty low in India] and turnaround smartly within 3850 maximum to the downside. Already there is a lot of fear on the bourses and in the 3850-4400 zone, the fear will be excessive to the extent that even trading in Nifty futures and options will go for a toss unlike now where it is just equities that are seeing low volumes. Below 3850, we have to be vigilant and get ready for one more pook at the same levels we had in October 2008. At sub 3k levels, Nifty melted over 250 points and then closed marginally below open at 2525 levels [the low of the day was 2250 odd points]. I did not follow the capital markets at that time and hence what I have with me is just the OHLC chart of the day. I don't personally think we will drop so much and am relatively confident that we won't close below 2525 even in these bear market conditions.
In case we do see these sub-3k and 3k levels on Nifty, I am going to go shopping for as many Nifty Bees I can for sure. It could not get better for me than hunt for assets, evaluate the cash flow models of any stock in Public or Private Equity to get the alpha on my personal portfolio. I am not a CFA but know enough about business metrics to evaluate the proposals brought on by any guy wearing an Armani suit and laying out some spreadsheets to show me how the investment in a venture is going to be. I am a strong opponent of Private Equity [the only thing I like about Private Equity is that it does not subject a business leader to lay out quarterly plans and get the stock price hammered for no reason on the bourses and of course does not keep any shares outstanding for speculation on the exchange. A vast majority of Private Equity deals are nothing but financial engineering of debt and creating alpha by tax shields. It is just a dignified way of setting up IPOs on the bourses that come with a roar on opening bell and then melt down over 80%].
With elections impending in 2014, regardless of where we fall on Nifty, 2014 is certain to bring cheer on the bourses. Even in the grim business scenario, we have enough domestic consumption that a minimum of 6% GDP growth is assured. If the global meltdown indeed comes through as indicated by blogosfears, yet again India and China will be rewarded by smart money. Moreover, if the Indian people start consuming cheap produces from their western counterparts, there will be capital inflows into the country. In due course of time, depending on how much badgering Nifty goes through, I will put my recommendations in here.
For now, the key levels are 4690-4720 and we need to keep a close eye on that. In all likelihood, with a few whipsaws up and down, we will end Sep series from the point where we started. Until then, we need to remind ourselves that Cash is King. Traders should use rallies on Nifty to go short but as indicated in the EOD Analysis on Friday, in a staggered manner with a hawk eye on 5196 levels. If we close above 5196 levels on Nifty, there might be a pleasant rally from the wounded bulls all the way to 5496 levels [Probability is less than 1%!!!]
Watch out for the Great Indian Banking Paradox coming up tonight.
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