February 2013

my weekly take .....

Trading levels  ---  4th / 8th   February    2012

RBI obliged …. Not only we got a 25 basis points REPO rate cut but surprise surprise … a 25 basis  CRR cut as well - which was not expected by many.

This meant euphoric positive reaction particularly in all rate sensitives and banks which enabled NIFTY to clear 6100. However … as expected by me ….. it dawned on the market that RBI will be sitting tight for next two meetings at-least. This means that next rate cut can be expected only in June meeting which is good 4 months away. Most market men had not expected this as they want rate cuts at regular intervals.

Markets … particularly banks sold off big time and we ended the day NEGATIVE. The chain reaction was triggered and we had two more down days resulting in a weekly close below 6000 … which was against all odds.

ALL THIS HAPPENED INSPITE OF OVER 3 BILLION DOLLARS INFLOW IN JANUARY FROM FIIs.

If you read my posts over last 6 weeks, I have been saying that there is something curious happening in this market which is just not responding commensurately to dollops of FII flows. It seems LIC has been selling blue chips left right and centre  for two reasons – 1… to create liquidity to mop-up government paper which is coming in the first quarter and 2…. They feel that valuations have gone out of sync with future earning potential.

Weekly closing below 6000 has brought in focus possibilities of further downside to 5940/ 5900 levels and that too when many market pundits were expecting a new all time high before budget.

The contours of the budget are now becoming a bit visible and looks like that we are in for some harsh higher tax provisions both in direct and indirect taxes. I don’t think this feeling is not good for markets to move much higher before the budget. At most we will test 6100 before budget. That is my feeling.

ALL THIS IS PREDICATED ON STRONG FII FLOWS FOR NEXT FOUR WEEKS .

My monthly trading levels are out and paid members have them. At 3,000 rupees a year, they provide tremendous value for money proposition.