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 my samvat 2070 levels  ( diwali 2013 to diwali 2014 ) .... hv been  somewhat revised. since i worked them out on 23rd oct earlier ( due to pressure from publisher - his deadlines )

since then, RBI policy has changed the outlook for most financial / interest  rate sensitive  as well assome other stocks dramatically and there has been a signficant surge forcing me to change annual projections.

these changes r shown below ....

 DIWALI ARTICLE .....

NEW ALL TIME HIGH IS BECKONING – BUT WHO  HAS REAPED THE BENEFITS  ? ? ? …….

I started working on this article just now (on 22^nd  October) and where do I find ourselves ? We are on the threshold of a new all time high for both NIFTY and SENSEX …. In fact we are just one good session away from both the landmarks. 

BUT ARE THESE LANDMARKS IMPORTANT TO ANYONE ? 

Definitely not for general investors – either direct or through Mutual Funds. These people have not made money in last 5  years.  Returns on the  bank fixed deposit would have made them happier.   FIIs have in fact lost money in dollar terms in last 5 years as most of the gains were eroded by over 35 % Rupee depreciation.   DIIs  - actually we should be saying LIC – are not concerned since their  investment decisions  are not taken with RETURN in mind but depend upon  the government diktat.

The broking community is not sure whether the retail investors  - who provide the bread to them  -  will return even after the new all time high since the mid-caps and small-caps are 30 % and 60 % down respectively considering last all time high hit in January 2008.

SO IT IS ONLY THE ANALYST COMMUNITY AND THE BUSINESS CHANNEL ANCHORS  WHO ARE  EXCITED AND GOING GA-GA OVER  POSSIBILITY  OF SUCH  AN EVENT. UNFORTUNATELY, BOTH THESE PEOPLE HAVE NO REAL STAKE IN THE MARKET APART FROM THEIR MONTHLY PAY-PACKETS AND THAT IS THE ULTIMATE TRUTH

Having made my opening statement, now let us review the previous year.

As mentioned last year, after Mr Obama’s re-election as American President, we had bountiful FII dollar in-flows due to continuation of easy money policy of FED chairman Mr Bernanke.  Popularly known as QE III, the biggest dollar infusion programme ever, US Dollar 85 billion are infused in American money market every month - WITH NO FIRM CUT-OFF DATE.

This has created tremendous gush of liquidity all over the world and all  asset classes are swimming in this whirl-pool.  We have got probably a little more than our logical share of this liquidity.  We have received over 10 billion dollars in last one year ( from Diwali to Diwali ) making a total of 28 billion dollars inflow from 1^st January 2012.

WHAT IS INTRIGUING IS THAT IN-SPITE OF THIS GUSH OF DOLLARS, OUR MARKETS  HAVE REMAINED  RANGE BOUND WITHIN  5200 / 6200  NIFTY LEVEL SINCE LAST DIWALI.

We have to squarely blame it on our poor macro-economic condition. We should be lucky to touch a 5 % GDP growth for FY 14 – DESPITE A FABULOUS MONSOON. Our industrial production numbers dip in negative territory every alternate month.  CAD – current account deficit – IF YOU WILL RECALL, I HAD WRITTEN ABOUT THIS POSSIBILITY LAST YEAR ITSELF -  is at all time high and we are struggling to feed that monster.

The result was a sudden massive depreciation of Rupee vis -a - vis dollar ( 25 % in 3 weeks ) and most other currencies. We touched unthinkable figure of 68.8 Rupees to a Dollar in August sending alarms ringing all over.  Since then RBI has tightened the money supply which has resulted in 10 year bond yields moving to 8.6 as against 7.25 prevailing in early July. This meant that most debt funds have shown negative returns over last 6 month period.

RETAIL INVESTORS IN MUTUAL FUNDS HAVE GOT IT WRONG ON ALL COUNTS – DEBT OR EQUITY OR GOLD.

While there were no worthwhile returns on investments in any asset class, the INFLATION continued to spiral. The famous troika – PM / FM and Monteksingh – kept on giving 3 months timeframes time and again for control of inflation BUT THEY DID NOTHING CONCRETE.  Only RBI Governor continued to battle against inflation by refusing to lower REPO  / CRR rates. But he was heckled at every possible forum ( probably instigated by PM’s coterie) for standing by the AAM JANATA.  Dr Subba Rao kept his cool all through but made a very poignant speech at the last available opportunity just before leaving the hallowed institution.

Every stakeholder from stock market is now pinning hopes on the announcement of 2014 general election and the favourable outcome from it.  All have given up  hope of any worthwhile steps to be taken by existing government in the coming 4/6 months. This government will only go thru in-voluntary motions and individual members will be busy cleaning / erasing whatever evidences left over by them ( for the misdeeds ) and make some extra buck here and there.

SO WE ARE GOING TO BE ENTIRELY AND UTTERLY DIRECTIONLESS WITH ONLY INERTIA TO HELP US THRU THESE  MONTHS.

RBI governor – MR RAJAN -  will continue to guide the monetary policy. But Mr Rajan is new and seems to be indebted to the PM and FM for this appointment. As such, there is every likelihood of his towing the government preferred line or the popular line. This happens to everyone in the first few months of the appointment till one finds his own feet.

But these 3 to 6 months can be crucial for the economy as we can slip  so much in the deep mud that resurrection from the same will be an uphill task.

AND GOD SAVE US IF IN BETWEEN,  THE GUSH OF LIQUIDITY BECOMES A TRICKLE – FOR WHATEVER GLOBAL REASONS.  WE MAY SEE A 20 % DROP FROM CURRENT HIGH LEVELS IN AS QUICK AS 10 TRADING SESSIONS.

SO, ALL TRADERS AND INVESTORS ARE ADVISED NOT TO EXTEND BEYOND A POINT. LARGE-CAP STOCKS HAVE MADE THEIR MOVE AND NOW THE OPERATORS WILL NUDGE THE POPULAR / MOMENTUM MID-CAPS. USE THESE MOVES IN LARGE-CAPS AND MID-CAPS TO DOWNSIZE YOUR COMMITMENTS AND TO LIQUIDATE YOUR OLD STUCK POSITIONS TO  MOVE TO CASH.

We are bound to have a 10 to 15 % dip, if not more, from these exalted levels at least once before the general  election results and your cash will be handy at that time as you will get good stocks 25 % cheaper than high levels prevailing now.  BONUS IS THAT YOU WOULD HAVE REMOVED SOME DUDS IN THE MEANWHILE IMPROVING THE QUALITY OF YOUR PORTFOLIO.

Let us hope and pray that the global liquidity situation remains benign for next 4 to 6 months enabling the markets to overcome this turbid time when nothing is going to work for it except liquidity and the bulls will be saved the blushes of seeing a huge huge downside immediately after pushing /achieving the new all time high.

The odds are stacked against us due to poor macro and several uncertainties due to our politics. After April / May 2014, we should have a strong, working and decisive government in place which will wither away the dark clouds gathered over our economy with some firm  positive steps.

Last but not the least – I must thank you all for patronizing  my website WWW.SUMAMURA.COM and I hope you have been rewarded in some way. You must have found it much different than other financial websites that you may have seen.

I am giving below a table covering several frontline stocks  / indices  and commodities with annual  entry / exit levels , stoploss and targets.  

 MARUTI  ....

  LT .... yesterday brokerages hv pushed the stock saying it is available below average historical P/E ..... 

BANKNIFTY and CNXIT ....

 weekly commodities dollar rates ....