Don’t Short this Market !..you’re up against Momentum driven by Liquidity

Don’t Short this Market !

Fundamentals and Valuations are being shrugged of by Increasing Liquidity and Inflows…This momentum is driving the Nifty and Sensex to new recent highs

Two Leading Broking Houses have literally overnight turned very bullish and talk of a Sensex range of 12500 to 14500 in the near term

Maybe they know where the Inflows are being sourced from and are possibly guiding them in !…Is there a connection with the outflows from Swiss Banks as the Swiss are gearing up to be more transperant and disclose names of beneficiaries of deposits if they suspect these deposits have not been disclosed to Tax authorities in the Country from where these Depositors originate !

And is there also a Connection with the General Elections !?… I remember the late 1980s and early 1990s,when I had authored a centrespread story for Mid-Day Publications on the connection between a short term Bull Run and  Stock Market Rigging and Manipulations and approaching General Elections….how Election Funds were created from Stock Market Gains…I had interviewed a leading MP,who candidly confirmed the connection but for obvious reasons refused to come on record and be quoted. 

If you recall,some of my earlier blogs on Indian Monies in Swiss banks…A report stated that India tops the List ! with US $ 1.5 Trillion stashed away in Switzerland

The BJP has sworn to go after these funds and bring them back to India,if elected back to Power.In fact just today,BJP leader and PM Candidate,LK Advani,has released a Report of Black Money stashed away in Swiss Banks by Indians.He has met the PM,Manmohan Singh on this and urged him to take action

Just imagine this power of Billions of Dollars  !…just US $ 17 billion FII Inflows in 2007 drove the Sensex up 47% past 20000 in 2007 and a combined US $ 36.4 b FII Inflows from 2005 to 2007 saw the Sensex move up 206 % in three years giving a CAGR of 45% !…and then in 2008 there was a huge US $ 13.1 b reversal and the Sensex decimated 53% to crash to 9647

POWER OF FII FUNDS

Year

FII Inflows in US $ Billions

Opening Sensex

Closing Sensex

% Move

2005

10.7

6626

9398

42

2006

8,5

9422

13789

46

2007

17.2

13828

20287

47

2008

(13.1)

20325

9647

(53)

2009

(1)

9721

11300+

16

In 2009,FII outflows had crossed US $ 2 b…they have been buying past month and just US $ 1 billion inflow has seen the Sensex  zoom 40%  up in just over a month from the early March low of 8047 to intraday levels of 11300+ on April 17,2009…Momentum is expected to continue with increasing Inflows and the Sensex is expected to move into a higher range of 12500 to 14500 in the short term  

 

Just Imagine if US $ 20 b has to flow into India as FII Inflows in 2009 ! It’s just 1.33 % of the US $ 1.5 Trillion stashed away by Indians in Swiss banks…Sensex will zoom past 15000 ! giving you PE Multiples of 18…..that’s a case of Markets running ahead of Economic and Corporate Recovery….What if the Recovery does not come this year !?

Clearly Markets,in the short term, are going to be more a Function of Momentum driven by Liquidity rather than Macro or Micro Valuations

Markets will certainly entertain you in the short term…switching between being offensive to suddenly being defensive….just like what you’ll witness in the the IPL T- 20 Cricket Tournament getting underway tomorrow in South Africa or even the skewed mandate guestimates on the General Elections that are already underway

It’s going to be one Hot Summer in May !

Punters are back ! They’re addicts…and they’re going to ride this Trend !…It’s like a Surfer who is constantly surfing so he does not miss that big Wave !

If your risk profile says you sweat at night if there’s a 20% overnight drop in your portfolio,you simply don’t have the stomach for high Volatility…so stay away from Equities…atleast from riding trends and trading !…and don’t grudge those who are making quick profits doing so…their risk profile is aggressive and allows them to play this Volatility and ride this Momentum

So,most of you out there…don’t bet or punt on either the Sensex,or the IPL or even the Elections Outcome !…If it’s excitement and entertainment you want,then Go and Gamble in Goa ! atleast you would have had great fun doing so while losing !  

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