– RBI hike in Repo and Reverse Repo rates have come not as an surprise. The kind of sounds which were emanating from the central banker and other policy makers was pointing towards this. We can recollect that the day petrol prices deregulation was announced all banks corrected significantly on fears of rate hike. The positive many analysts and investors missing to notice here is that the hike is just of 25bps as against expectation’s of 50bps and above. The scheduled meeting of RBI is on 27th/July and they may review the situation again at that point of time. CRR has not been touched and that should be taken down positively by the market.
– India is developing very fast and is the only country today showing real growth (unlike China which has saturated and is trying different and funny ways to create jobs) and hence some amount of inflation would continue to be there. The common man is suffering due to bad policies of the government. There is no visible action by the government or the ministry. Sharad Pawar is busy with cricket and the public comes only second in the priority list of his. The 100bps inflation rise which may happen is all due to fuel price hike and hence where is the demand which needs to be killed by hiking rates? Money availability in India is at costliest rates when compared to other countries.
– Thus we see FII’s borrowing money at cheap rates in their countries (between 0.25 to 3%) and then investing that money in India and participating in our growth. More than half of Sensex is today held or major’ly controlled by FII’s. Thus high rates in India is making its own public invest in band FD’s and hence making Indian market dependent on FII flows. So what have we done? We have been selling our Equity to foreigners! Country runs on corporates and our major corporates like ICICI, HDFC Bank, and many other companies are foreign companies by virtue of FII holdings.
– The solution is to bring in more investors in market, we mean Indian investors. We at TamilNadu Investors Association (TIA) along with Exchanges, Fund Houses, etc., have been conducting various investor seminars at various cities. Our agenda is to bring in more and more first time investors into the market thus helping the markets find more depth and should become lesser and lesser dependent on foreign money flows. We hope each one reading this will convince atleast one individual to enter equities for long term. How and the process can be asked from us if necessary.
– Its official now that RNRL will be merged into Rpower and one share of Rpower would be given for four RNRL shares. The event was expected as RNRL was left with an empty bowl after the supreme court verdict. The ratio would have been positive for RNRL shares if the deal would have got them Rpower shares for every three held.
– Last wee we had mentioned that… “Market would continue looking at the monsoon very closely” and we are already below normal. One quarter of FY 2010-2011 is already over and market will now on track the quarterly results as well. The resistance comes at 18360-18600 on Sensex and 5480-5555 for Nifty. We would be in a range until all major companies declare their results. Our year end target remains at 19300-20200 for Sense and 5760-6070 for Nifty. We last week had recommended ION Exchange Ltd for medium term to long term holding. The stock has done well till now. We would be sending more calls on our Free SMS group. To join just type a message saying… JOIN MARKETFASTFOOD and send it to 567678. One can also subscribe to MFF at very nominal rates.
Vivek Karwa, CFPCM
Office: +91 – 98-405-405-75