Markets: What Next?

The market fell for 8 straight trading sessions before twitching up its tail a bit on Friday. Probably helped by the falling global oil prices and/or the short covering purchases and/or some other reason. Whatever be the case, the picture does not look pretty for the near time. In fact the markets have badly misbehaved since the start of the year. Most of the mutual funds are reporting negative ytds and so are many stock prices. NIFTY took out its 50 and the 200 moving averages in one swift fell swoop. As always, the reason on the surface is the rapid vacuuming of money by the FIIs even as the DIIs try to pick up the pieces a little. So what next? Will the NIFTY fall down further to perhaps 5375 thereabouts before finding support? Rahul commented here the following words:

I think commodity prices will start coming down now, also a lot of froth in these markets is due to risk premium of Middle East crisis and speculative positions. We have seen how silver has almost fallen 20% after the contract margins were raised in China and India. Therefore I think commodities like Crude, Copper and base metals are next in line with Silver which has fallen nearly 20% from the peak in a week. This should bring inflation down and should trigger a big rally in Indian and emerging markets. This should begin somewhere in the middle to end of May.
My broad view is if commodity prices comes down by the end of this month which I think will happen, Indian markets could break all time High’s by Diwali i.e. October end.

But then today’s www.economictimes.com mentions that Angel Broking’s MD does not expect the Sensex crossing 20,000 (~ 6,000 for the NIFTY) over the next 6 months. Fine. I don’t know about all time highs (~ 21,000), but my gut says that 20k for the Sensex is possible. Lets see.

Silver has certainly fallen given that the poster face of uncertainty was slain recently. Seemed like the fall of Osama was a cue for silver to retract heavily. For once my tweets found their intended mark 😉

Of course, the other big event has been yet other round of belt tightening by the RBI when it announced its latest monetary policy approach. Forget exchange rates they seem to say, inflation is obviously a much more sensitive number to control. Which is all fine, but spare a thought for the poor real estate developers. Nothing is going right for them – or at least their equity prices! I remain committed to my play on Godrej Properties via an investment in Godrej Industries Ltd. though. The other big bunch that logically should be affected would be the banks, but the short term charts of banks show a mixed picture. One good bank that has corrected nicely of late is Axis Bank and I’m keep an eye open if that’s a possible entry point. Bank stocks surely get over this rate hike headache much more quicker than other more rate sensitive stocks.

Infosys, though not leveraged, continues to bleed. What can the new guard do? Well, they’ve certainly thrown in a corporate action in the mix by shortening the company’s name. The trouble about over-owned stocks is that when they start getting out, they go out in droves. Some wildebeests, these FIIs are!!

The other idea that is forming is about Provogue. I know its another slice in the real estate commotion and it does have a good packet of debt, but maybe, just maybe there is something to the notion. I am digging and reading up and trying to follow this trail and hopefully Mr. Market will oblige by falling a bit more?

The fact of the matter though is that the juice, the “spring” in the step is gone – every purchase idea that germinates in the head is now getting knocked around with doubts. “What if the markets fall further”, “Is the worst over? Maybe not” – this uncertainty is so unnerving. When can we start trading volatility in India please?