MFF – 081207 – 22:22 Hrs

+ Stock Markets have been witnessing lot of volatility last few days. One day up and the next day down has become a regular phenomenon. Seeing the moves investors right now are feeling that market do not understand anything, so why do market stalwarts say, “Markets know Everything” and factors in the news well in advance. They are moving as if there’s total confusion on what is going to happen next.

 

+ The fact that market is confused at this point of time is in fact good news for investors. Most of the selling, which was coming in due to global factors seem to have settled now. We are not witnessing any major selling and the fact that no fresh bad news on bankruptcies from US are being heard is yet another solace we can take. So considering we are at the bottom range of this bear hug, markets are now confused on what to do next. After this big crash one definitely cannot expect market to move up immediately. Hence we need to give time so that the dust completely settles down particularly after Dec quarter results are announced.

 

+ Companies are expected to declare shocking results in Dec quarter and that would be the final event before we can settle down completely. Any surprises would help review the sentiments faster. Government is working hard to stabilize the economy and it very well understands that something has to be done on war footing especially since the elections are around the corner.

 

+ Firstly came in the most expected move of cutting fuel prices. Economy is going to get big relief from this Petrol and Diesel price reduction. Many feel the reduction is not enough since the Indian basket of crude has fallen to almost $40 and the Govt. could have easily cut the price of petrol by Rs.10/- further cuts may have been reserved for future, hope so. The reduction of the fuel prices is going to reduce inflation by 0.4% next week!

 

+ Next comes the cuts by RBI in Repo and Reverse Repo rates. Till now the banks have been holding the lending and deposit rates somehow. Expect them to reduce deposit rates anytime in coming days. We will see some interest coming back to markets once the deposit rates are cut. The RBI is now very clear that interest rates have to fall. Earlier governor Mr.Y.V.Reddy kept increasing the rates in order to slow down the economy and inflation. The end result was that economy was pushed almost to the deathbed, now the present governor and Govt. are taking all steps to pump in as much oxygen as required by the economy so that it can rise back.

 

+ Today was a day for yet another big push. The Govt. took time out to announce stimulus package of Rs.20000/- Crs. By this big move that too on a Sunday we can feel what’s going on in the ruling UPA’s camp. Something has to be done for the industry so that demand can some how pick up. My initial observations suggest that prices of many products are likely to fall including that of cars. Excise duties have been cut. 4% cut in CENVAT is a relief but what impact will it have on the fiscal deficit is a question to be answered. The real package would be known after reading newspapers tomorrow, as they would carry all details of the package.

 

+ Many messages have been received by me in the evening comparing India’s small package with the three digit package in billions announced by US and China and some other countries. Let us be very clear that this package in itself is very big considering the balance sheet of the Govt. The packages of US and other countries are not actually meant directly for the industries and the consumers. They have been focusing mainly on bailing out companies and letting them escape bankruptcies. There’s no such thing happening in India like companies closing down. We should be happy about this package. Had it not been election season, India would not even have dreamt about such relief package by the Govt.

 

+ On account of above events people are expecting a big gap up opening on Monday. How long will it last? Five state assembly election results would be announced on Monday! Expect market to get volatile as the results pour in, by 12 noon the scenario would be clear. The support for Nifty comes at 2693 – 2634 and resistance at 2870 – 2900. I wanted to give a fresh call today but had to withdraw it after the Govt. announced the package today. DOW will find resistance at 8950 – 9080 – 9300 and support at 7976 – 7900. Dow testing 7900 is possible before 18th of this month.

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