Scary October 2008…Sensex Oct 1:13056….Oct 27: Down 41% to an intra-day low of 7697….Oct 31: Bounce back 27% to close at 9788 in just three trading days…..so is the worst over ?

This week began with the Sensex recording an intra-day low of 7697 on Monday and it has closed up 27% from this low  to illuminate this Diwali week by a bounce back of 2091 points

October 2008 itself has been a very scary month…The Month began on October 1,2008 with the Sensex closing at it’s highest for the month…13056…It’s been sharply downhill since then ,plunging 41% or 5359 points to a low of 7697 on October 27,2008 before closing more respectfully at 9788 on October 31,2008 

So is the Worst Over ?

Not by a Long Shot…..Action has largely been restricted to Large Cap Stocks in the Sensex and the BSE 500 with heavyweights,HDFC and RIL leading the way ,up 17.48% and 13.81% respectively

BSE Indices

Oct 31,2008

Close

Up by

% Up from previous

trading day close

Sensex

9788.06

743.55

8.22

Mid Cap

3200.02

105.54

3.41

Small Cap

3765.11

90.50

2.46

BSE 500

3570.07

219.45

6.45

Fed has cut back rate to 1%,last seen in different circumstances in 2001, and the World is moving towards a Zero Rate Quantitative Monetary Easing Policy or QMEP…even Japan,with it’s 0.5% rate is thinking of reducing it.Money Supply and not Rates will be the Control Tool. 

With Recessionary and Liquidity crunch conditions unlikely to go away soon in developed nations,their GDP Growth rates will converge to Zero %

In India,with FII OutFlows continuing to dominate proceedings,the Sensex will face a challenge trying to create it’s own independent Identity and will continue to mirror and shadow the trend in Global Indices,particularly the Dow.Over US $ 3.5 billion has been moved out by the FIIs this month alone with the year’s aggregate to date crossing US $ 11 billion. 

Also there is a perceptible Corporate Earnings Slow down and many in the Construction and Infrastructure Sector have stopped work on many Projects with Demand and Asset Prices easing considerably and increasing difficulty in Financial Closures

HCC is one such major player in this sector that has announced project stoppage.It’s share price had slipped below Rs 40 today and closed without gains at just over Rs 41…it began this week with a year low of Rs 30…It had begun the Year 2008 with the Year High of Rs 279 !

Countries have been lining up the IMF for huge Bailouts…US $ 100 billion to six countries to be decided soon,probably today

The Global Economic situation remains grim and scary…India is not decoupled to escape the consequences,nothwithstanding what our FM has been assuring us right from Sensex levels of 21000 !….The second half of FY 09 will confirm that the Earnings slow down continues in India

And with the Dow expected to test 7000,so will our Sensex…so don’t be in a hurry to get back in at 10000 

The Worst is not yet Over…Pull back Rallies in such scary,nervous and uncertain circumstances are deceptive

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