Is BSE at 7500 possible within 1 year ?

[raosrinivas]

Its rather easy to be Positive in Uptrend and negative in downtrend. Just a reflection of Greed and Fear, two basic factors that govern any human enterprise. Its information,knowledge and wisdom that helps us in overcoming these primal instincts.

Just as there is no cogent argument for Sensex 7500 , like so there is no argument as to why DII should not invest.

They may be positive and looking at the longer term perspective.May be there would be some sideways movement and market may like to find its level , near 10000 or at 7500. These are good investment level for long term perspective. Those who don't believe in DIIs investing in market are likely to take money out, nobody is stopping them. Since that is ,clearly, not happening market is oversold in the intermediate term perspective and the outcome would be reflected in majority actions each taken independently. I think overall sentiment is that of fear in short term but optimistic in long term.

It is my two cents that market would find its hold and stay near 10000 in the current situation. But 7500 is more lucrative for me and I would jump in whole hog if that happens.These are the levels that I was waiting for since 2005-06 for second rush of investment.

pk

pkjha,

my 7500 assessment is valid when the sensex was 15k and moving towards 20k, but right now i am skeptical if 7500 will hold or not, so my range is 6k-7.5k.

There are many factors like economy, usd-inr rate ,oil import bill, fertilizer import bill, etc we have to also see food grain production this year, in light of severe fertilizer shortage.

after my 50rs per dollar prediction, my next prediction is our own credit crunch in the banking sector, deleveraging causes asset price decline, job losses. home loans will only be paid if the asset prices increase, otherwise the borrower will not have any incentive to pay back the loans. in india we don't have any credit history so it is easier for people to walk away than in US.

economics is a simple subject, all that is required to understand is commonsense.

thanks
Srinivas

 

[pkjha30]

pkjha,

my 7500 assessment is valid when the sensex was 15k and moving towards 20k, but right now i am skeptical if 7500 will hold or not, so my range is 6k-7.5k.

There are many factors like economy, usd-inr rate ,oil import bill, fertilizer import bill, etc we have to also see food grain production this year, in light of severe fertilizer shortage.

after my 50rs per dollar prediction, my next prediction is our own credit crunch in the banking sector, deleveraging causes asset price decline, job losses. home loans will only be paid if the asset prices increase, otherwise the borrower will not have any incentive to pay back the loans. in india we don't have any credit history so it is easier for people to walk away than in US.

economics is a simple subject, all that is required to understand is commonsense.

thanks
Srinivas

raosrinivas

Predictions are predictions and they are useless without timeframe. Ultimately everyone will die. So what's the use of predicting death.

pk

 

[Cactus]

Just as there is no cogent argument for Sensex 7500 , like so there is no argument as to why DII should not invest.

Pankaj,

Did u remember......earlier statement of SEBI chief on P-Notes......when market crashed by 1000 points.......

and the rumer of banning 11 FII's in 2006.......

on both days .......one thing was common.........

It was sudden......& Index crashed.......but after FM's statement it recovered......

Did the FM Did some magic.......? if yes........why it couldn't continue.......?

There are rumers.......both the Time our GREAT FM called UTI & LIC officials and ordered them to buy..........

This type of statements/activies can give temperary relief or time to exit but don't provide a perfact base.

This time one more thing ..........US & India......both has to face the election.......& politicians need money.......

BTW a temprary bounce-back is always possible.

 

[raosrinivas]

raosrinivas

Predictions are predictions and they are useless without timeframe. Ultimately everyone will die. So what's the use of predicting death.

pk

if you could predict rupee moving from 40 to 50 , you could have made 25% using it. don't you think so ?

 

[pkjha30]

Pankaj,

Did u remember......earlier statement of SEBI chief on P-Notes......when market crashed by 1000 points.......

and the rumer of banning 11 FII's in 2006.......

on both days .......one thing was common.........

It was sudden......& Index crashed.......but after FM's statement it recovered......

Did the FM Did some magic.......? if yes........why it couldn't continue.......?

There are rumers.......both the Time our GREAT FM called UTI & LIC officials and ordered them to buy..........

This type of statements/activies can give temperary relief or time to exit but don't provide a perfact base.

This time one more thing ..........US & India......both has to face the election.......& politicians need money.......

BTW a temprary bounce-back is always possible.

Hi cactus

I am aware of all these facts.I have heard phrases like "don't catch falling knives" , "dead cat bounce", pullbacks and whiplashes. I am a keen observer of Indian economy. Market doesn't function in isolated manner. Its base is economic strength. No country would watch by the side while economic edifice crumbles. Intervention is always there and it will remain to keep faith of the people in the ability of the sovereign State to function in a crisis.There was a time when we had to sell gold to keep economy running. Situation is now different and confidence is much better.

pk

 

[Cactus]

Dow broken by more than 600 points last night.

I guess the next target for dow.........6255.

 

[raosrinivas]

A CRR cut will free up money in banks , causes inflation and makes rupee cheaper against the dollar. so we will pay more for oil and other imports. This will only serve only one purpose, making dollar hit 50rs.

FII's will still sell off, if you are a FII you invested $100 in 2007 dec, then you would have lost 40% because of stock market and 25% because of rupee depreciation.

 

[pkjha30]

A CRR cut will free up money in banks , causes inflation and makes rupee cheaper against the dollar. so we will pay more for oil and other imports. This will only serve only one purpose, making dollar hit 50rs.

FII's will still sell off, if you are a FII you invested $100 in 2007 dec, then you would have lost 40% because of stock market and 25% because of rupee depreciation.

Crude oil prices have hit $ 82.47 on the fears of impact in demand.
Its 52wk range is 82.00-145.85. Forecast for next year is $95.
If one remembers confidence in market and economy was broken due to high oil prices and rest fell like dominoes as high oil prices put pressure on national economy. High import bill etc.India , which has administered prices, was forced to increase oil prices by 5 rupees at one go.Still oil companies are in loss on retail sales.That is the reason India has not reduced prices even though Oil corrected by $50.

Now if dollar goes up as it is likely to breach 50 rupee mark, certainly import bill would go up but still less than what we would have paid when it was $145. So depreciation may not matter much while economy slows.

Strong dollar means high import cost for some items , demand of which i will certainly reduce such as items of consumption/luxury. whereas export would become cheaper and that should help export oriented companies.

Now coming to CRR cut. Presently FIIs are taking money out of India so any cut in CRR will be absorbed by outflow and hence I don't think it will impact liquidity in economy in general as against the market. RBI has also announced more cut on saturday. Finance Secretary mentioned that every 0.5% cut frees up Rs 25,000 crores. So by cutting 2.5% Govt will release Rs 125000 crores and that would be absorbed by FII very easily.So there would be not much of liquidity left in system. It is important to recall that RBI had raised CRR when FII flows was unabated in 2007-08( before march 2008) and market was peaking during Dec07-Jan 2008. That was to absorb excess flow from FII.

Now question remains why RBI announced CRR during market hours and why it announced that on Saturday it would raise again.

In my opinion , it is to check the tendency to short the market. Perhaps RBI believes that Market has reached a saturation point and now it is purely driven by local shorters.Once FIIs flow is stemmed one needs to keep in check local punters to cause further damage. I don't know how far they would succeed as FIIs can't return as yet since their own house is burning. And FIIs have made more than enough from India to absorb these little losses. Just check their Index options and stock options, things would b more clear.That would show how they are hedging.

Retail,HNI and DII would not return till positive sentiments prevail.That is why I feel there would be base formation at these levels for some time to come.Two elections are a formidable factor to reckon with.

pk

 

[raosrinivas]

pkjha,

in one sentence, all that matter is do we have a trade surplus or a trade deficit. india always has a trade deficit and so a cheap rupee hurts because things will become more expensive for us. if there is no circuit breaker then we would have seen <10k today. because market will be closed till monday.

the effect of CRR cut will be visible realtime in the forex market, not in the stock market. today circuit breaker will prevent sensex < 10k.

 

[pkjha30]

pkjha,

in one sentence, all that matter is do we have a trade surplus or a trade deficit. india always has a trade deficit and so a cheap rupee hurts because things will become more expensive for us. if there is no circuit breaker then we would have seen <10k today. because market will be closed till monday.

the effect of CRR cut will be visible realtime in the forex market, not in the stock market. today circuit breaker will prevent sensex < 10k.

I have not seen balance of payment positive for India since independence. So rupee going up and down will first hurt consumer goods and luxury goods as such imports would get reduced. Essential commodities are what we can't help and have to be imported. Yes export would also become cheaper. So that improves BOP a bit.

Forex will see impact as you say for the reason that FII would have to take rupee out in dollars. No guessing here . That does not impact liquidity

I think BSE has adopted a new system for circuit so it may not happen. But if it happens it will be catastrophic for sentiments.

pk