India Morning Report: And Then The Markets Struck 7500

Well, the mouse ran up the clock and Global markets will rock around the clock this year i guess. So someone banked an ugly appreciation of the Rupee with an ugly depreciation of it three years ahead of time and today it starts back to 57 levels hurting a lot of weak economy stocks. Almost like the Pied Piper played it. Still, a lot of Indian Economy watchers are just looking for rats who are actually losing in this and the best short candidates would be IT and I guess the fact that Pharma actually has a future coming up which fundamentally at lower levels even IT can justify will probably play in favor of Pharma only after a one day break when the markets correct. The negative US GDP is similarly likely to be treated like pure chaff by global markets waiting for a big Q2 release.

The MM Joshi rumor mountain is past. We will have a lean cabinet, market volatility(to the extent reported by VIX which technically is not real vol)  will be at an all time low and probably we will be so optimistic by end of the session when we ring the bells for 7500 being reached on the Nifty and 25000 again on the sensex that someone will try a pansy bull trade to 7800 instead of looking at the facts and we will have a silly wall breakdown to deep 7300 levels ina fast session. More likely howebver, markets will take a break – not a flat onbe for consolidation, but a break that actually is negative to 7300- levels and in the worst case, right now we will not correct below 7100 before the budget comes to pass. Or the Rajya Sabha impasse comes about in any critical case ( RS is controlled by Congress)

Anyway, I’d say the analysis above is not a casual out of body experience but a critical admission that needs to be made before any investors go walking into the netherworld for having seen a “Miracle” nbeing performed on the banks of the holy ganges.

The Rupee’s rise as shalloiw as the fall isnot backed yet by debt buys. Fixed Income yields continue at 8.8% and will head south in due course. A new fiscal target is more or less pre approved for the new Cabinet Minister and welfare programs are also insured by BJP manifesto objectives, making subsidies an easy scapegoat for the required changeover and a new edition of the FRBM guiding the government. A large disinvestment program with Shourie back in the saddle compares with another younger minister leading the able MOF team and implementing DTC and GST first.

The Friday rest allowed an uncomplicated market move in a market which is almost too easy to read despite the depth and complexity of the textures in this market. Most retail and MF investors therefore remain overtly cautious and the rally benefits no one.

IDFC having reached 150 levels all Financial Services busineses like Infra, Power or other auto/gold seem to be off color in Monday trading. But the Banksw wil not be able to take  aslack unless you have a overflow into bad PSE banks before the markets lose these new levels again ( earlier intraday rummages scored high on Election Friday) Real Estate is also overvalued esp in Mid Cap. Mid Cap profit booking should start the downhill oil slick sometime next week if not Thursday. That period will see where the easy volatility trade firms up on the indices. This time I’ll be watching before showing what the strategy will be.

State Bank results proved the markets like NPAs off the books more than anything else. Yes I do not think the FII limit in other banks is important either. The markets are just stuck on an old bad habit andfinally no one will attempt to short the bank till it scores 3200 or even 3500 whence we can find out the final profit taking levels which the markets would ( no hope really!)like to spin today and tomorrow). I am watching the Banknifty , probably at 16,200 or 16300 I am a sure short bet on this tripe.

Monday is again one of those days when Bharti and ITC are both in the long trade, but the bank investment limit confusing people or the news of Debt index or that inflation target thing are unlikely to make the agenda in this NDA-I (Modi-I) dispensation.

From the looks of the late morning session, the markets can also stick around 7400 allweek and make the final rush last trying (unsuccessfully) to bump up the IT trade as a strong one , probably instead waiting tillt he auto data for May turns around. Markets have some profit takers getting a free rein and most analyst shorts on Pharma look to be early failures  with not many institutional holders yet in Pharma making that probable strong long trade in 2014 despite the currency moves likely lasting as they will be on most buy lists.


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