Nifty: Prognosis

Wednesday, October 15, 2008

Time to step back and review the market; Nifty is crashing again (below 3400 again) and global markets seem to have unwound from the central bank largesse. Reserve Bank and Finance Ministry in India are telegraphing liquidity problems. RBI acted prudently in cutting off bank credit to realty companies almost two years ago...despite these actions, it seems significant problems are surfacing.

Everything is pointing to a trading range for Nifty between 3000 and 4000, with capitulation levels around 2550. Fear is everywhere, and it seems greed is also ebbing. A significant liquidity event is required to create the capitulation....there have been no shocks in India...I think it must be around the corner.

Reduce risk exposure to zero; batten down the hatches. The calm before the storm lasted only a day...the fury is on the way. As I said in my earlier posts, Markets up: What has changed? use every rally to sell and sit on the sidelines.

Hedge fund redemptions will be a key driver of our markets...prognosis is not healthy.

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