May 06 revisited ... SEBI issues draft guidelines, panic in the morning with markets hitting LC ... then, we have a change of scenario. As against May 06, this time we see a stunning recovery to pull back almost all the way, closing 2% down, give or take a few. So, have we become 'decoupled' from FIIs enough to go our own way and we are 'mature' enough as investors at large to know the right from the wrong ?
I sense we have an interesting scenario to pan out ... May 06 was just a proposal to levy tax by CBDT, which was a miserly 10% that we all pay. Oct 07 is a proposal to close all PNs based on derivatives. On a rough estimate, that means closing $ 25 billion plus worth of PNs and by extension, closing positions to the same tune from the markets. Yes, there is a window of 18 months to do that ... but knowing that the same has to be done, how many will wait for 6-12 months even once the proposal becomes a law ? What interest would those PN holders have to withdraw in an orderly manner as opposed to pulling out the money whichever way they feel like ?
FIIs sold over 6500 crs today in F&O and cash markets, which mean over $1.5 billion ... I will wait with interest to see what happens in the next two days. A inflow of $8 billion in last two weeks has taken us up 10% on the index ... wonder what will happen if just that amount of money is withdrawn in next two weeks ? And given today's sell figures, we wont have to wait two weeks for that $8 billion withdrawal to happen.
Most people would call me a bear and would point to the 'strong' recovery we had today. In my defense, all I would say is that I view this as not a recovery but as cheese for the mouse ...with the mindless euphoria that nothing can go wrong with India story blinding one to all reason. As always, I will stick my neck out and say that nifty will most likely go down to 4875 levels. Unless we see the PN draft notification being withdrawn completely ( which would leave SEBI and FM with egg on their face and with their credibility in tatters), I would put the odds on going down than up. So keep your eyes and ears wide open .... and dont go berserk on seeing 'red' as a traditional bull !
I sense we have an interesting scenario to pan out ... May 06 was just a proposal to levy tax by CBDT, which was a miserly 10% that we all pay. Oct 07 is a proposal to close all PNs based on derivatives. On a rough estimate, that means closing $ 25 billion plus worth of PNs and by extension, closing positions to the same tune from the markets. Yes, there is a window of 18 months to do that ... but knowing that the same has to be done, how many will wait for 6-12 months even once the proposal becomes a law ? What interest would those PN holders have to withdraw in an orderly manner as opposed to pulling out the money whichever way they feel like ?
FIIs sold over 6500 crs today in F&O and cash markets, which mean over $1.5 billion ... I will wait with interest to see what happens in the next two days. A inflow of $8 billion in last two weeks has taken us up 10% on the index ... wonder what will happen if just that amount of money is withdrawn in next two weeks ? And given today's sell figures, we wont have to wait two weeks for that $8 billion withdrawal to happen.
Most people would call me a bear and would point to the 'strong' recovery we had today. In my defense, all I would say is that I view this as not a recovery but as cheese for the mouse ...with the mindless euphoria that nothing can go wrong with India story blinding one to all reason. As always, I will stick my neck out and say that nifty will most likely go down to 4875 levels. Unless we see the PN draft notification being withdrawn completely ( which would leave SEBI and FM with egg on their face and with their credibility in tatters), I would put the odds on going down than up. So keep your eyes and ears wide open .... and dont go berserk on seeing 'red' as a traditional bull !
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