Commentary from a Newsletter

GLOBAL MARKETS ARE ON NEW HIGH OUR MARKETS AT THREE MONTHS LOW:

The Friday’s rise of 270 points after the earlier 300 points rise comes with the Infosys results and guidance. The curtain raiser for the Q4 results to follow seems exciting. When every one was crying wolf and unable to see any reason for the market to rise and predicting that the markets can only fall are now wondering what to say.

It was Albert Einstein who said that reality is the greatest illusion in this world. This is applicable to our market as well. This made him take interest in the Indian concept of Maya. When the RBI increased the rate of interest every analysts said that sectors like banking, auto and home loans, construction and real estate will get affected badly. Yes it was the truth at that time. All the shares belonging to these sectors declined very sharply. Then what happened? Many found these shares unusually low priced and attractive. Then buying bought up the whole lot of shares to back to their earlier levels. The moral is not to sell in panic on hearing bad news. RBI has hiked the interest only twice whereas in the USA the interest rates have been hiked over 14 times. That does not mean every thing is over in the USA.

WHAT ARE THE CURRENT BULLISH SIGNALS?

As mentioned earlier, the Indian markets have under performed the world markets. Most of the international markets hit their all time high in the last three months. BSE Sensex is at the bottom of three months low. When the markets have already gone down there are better chances for our markets recovering.

Also look at the factors responsible for bringing the markets down. Hike in the interest rates, some negative provisions in the budget, fear of market friendly Congress loosing the UP poll and run away inflation are some reasons that have kept the markets lower in India. This Friday for the first time the date on inflation announced show that the rate of inflation has come down for the first time below 6% to 5.74. RBI wants the inflation to stay around 5%. If this can be achieved further rise in interest may not happen.

For the last three to four sessions the FII have turned buyers. Their buying is at an average of Rs. 250 to 400 Cr against their normal placement of Rs.1000 Cr. a day. Any time expect the further allocation to follow and that can change the scenario. Whatever it is our markets still have strength and refuses to go below certain levels.

As the market has recovered some of its post budget loses there is a likelihood of another fall for some reason. Gather some strength to buy when the next fall comes. This is becoming the in thing in the market today.