India: Equity Market Update

Saturday, November 15, 2008

(click on image to enlarge)

Nifty traded in +or - 10% band of its 200 day average from 2004 through to the middle of 2007...then we had 'euphoria' and the bust of January 2008 which brought us back into the range.

In October 2008 the index has decisively broken through. The ratcheting down of economic and earnings prospects going forward is responsible for a significant portion of this market decline. However, the continued downward pressure is due to continued liquidations by funds. Asian funds have reduced positions by over 20% while their cash positions have increased by less than 1%.

This is due to redemption. Money is being pulled out of funds...this is forced selling to reduce leverage and cover losses. Most of this activity is behind us...

FII's continue to sell; Rs 811 cr on Nov 14

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