India Market: Capitulation Underway

Friday's sharp decline in the Nifty begins the final phase of this bust: investor capitulation. While I keep looking for a longer time frame, action is getting compressed into a shorter and shorter period of time.

A liquidity event could create the final blow-off...redemtions and forced liquidations from Hedge funds could come either side of the November 30th reporting date.

Arm yourself with cash; a V-shaped recovery will come as we rotate out of opportunistic to value investors. I continue to target 2550 as buy-in levels, although a blow-off could take it lower. I may not get the bottom, but when it hits 4000 by January 2010 a positive return of 60% will look great.

The spread between 91 day US treasury bills and the 90 day rate that banks lend to each other has declined nearly 1% to 3.63% on Friday. Is this a first sign that central banks actions are having the desired effect on credit markets?






FII flows continue negative with the bulk absorbed by Domestic Institutions.

FII & DII Turnover (BSE + NSE)

(Rs. crore)
	FII			DII
Trade Date	Buy	Sales	Net	Buy	Sales	Net
17/10/08	2,308.40	3,223.94	-915.54	1,363.16	650.39	712.77
16/10/08	2,310.01	3,470.64	-1,160.63	1,465.47	727.70	737.77
15/10/08	1,887.99	2,918.78	-1,030.79	1,472.38	802.42	669.96
Oct, 08	29,568.55	40,194.02	-10,625.47	16,291.01	9,697.63	6,593.38
Since 1/1/08 *	611,554.57	703,904.89	-92,350.32	246,734.44	182,751.07	63,983.37