The indices gapped down on the back of CRR hike announced on friday evening and never recovered from there. A carnage in the stock markets, on the back of average volumes. Second biggest fall in the history of sensex, the biggest being the one we saw in May 2006. Now, the news were bad, but not as bad as the markets made them into, I would say. Across the board indiscriminate selling ... ending in a 4.72% fall in sensex ! My views posted yesterday can be read in the light of what happened today and one can realize the import of it. Nifty breached 3660 level once again and as with earlier breach, today also was a panic/kneejerk reaction. So, sanity should return to the markets tomorrow, hopefully and we should be able to regain the 3660 level as before.
The high interest rate regime is beginning to raise red flags, as was evident from what was being said all day on various news channels by different people. What is a bigger worry is that Morgan Stanley and JP Morgan have, for the first time probably, come out with one, a GDP growth of 7.5-7% in next two years as against 9% projected by our FM & RBI and two, have advised their clients to sell India investments and shift to China and Thailand. The foreign brokerages view, to be taken with a pinch of salt always, isnt a run of the mill projection of where they see the index or what they consider fair value for the Indian markets. This, for the first time in recent years, could be a fundamental shift in their view on India, which could be a bigger problem for the RBI and the FM than inflation, in case the FIIs decide to shift even a part of their investments from India to other countries in Asia.
If the markets continue to be negative, then we have to keep the 3550-3530 level in focus, which, if broken, could activate the H&S formation on the Nifty charts ... and if that happens, its going to be ugly, with a probable target of 3060-2980 on the downside. One can now realize the importance of 3660-3550 levels ... and we hope that they dont break.
The high interest rate regime is beginning to raise red flags, as was evident from what was being said all day on various news channels by different people. What is a bigger worry is that Morgan Stanley and JP Morgan have, for the first time probably, come out with one, a GDP growth of 7.5-7% in next two years as against 9% projected by our FM & RBI and two, have advised their clients to sell India investments and shift to China and Thailand. The foreign brokerages view, to be taken with a pinch of salt always, isnt a run of the mill projection of where they see the index or what they consider fair value for the Indian markets. This, for the first time in recent years, could be a fundamental shift in their view on India, which could be a bigger problem for the RBI and the FM than inflation, in case the FIIs decide to shift even a part of their investments from India to other countries in Asia.
If the markets continue to be negative, then we have to keep the 3550-3530 level in focus, which, if broken, could activate the H&S formation on the Nifty charts ... and if that happens, its going to be ugly, with a probable target of 3060-2980 on the downside. One can now realize the importance of 3660-3550 levels ... and we hope that they dont break.
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