Sensex and Nifty being pumped up by FII Inflows to go to 20000 and 6000 and beyond respectively….Tread carefully in the short term

Judge for yourself that the liquidity through relentless FII Inflows is pumping up our Sensex to reach 20000 and go even beyond……. ofcourse the suspicion lingers whether these FII Inflows are genuine,are sustainable and are being applied for long term investments…and they are not hot monies that can cause havoc if they reverse out of India,equally fast

FII EQUITY INFLOWS OF US $ 16 BILLION TILL DATE IN 2010 DRIVING OUR SENSEX TOWARDS 20000 AND BEYOND

 

TILL SEPTEMBER 20,2010

 

In Stock Exchanges  : US $ 12 Billion

In Primary Markets : US $ 4.4 Billion

 

In September 2010 itself till date : US $ 3.4 Billion

 

Date

In September 2010

FII Equity Inflow in US $ Million

Cumulative

FII Inflow in US $ Million

Sensex Close

Points Up by from Previous Day Close

8

101

101

18667

22

9

253

354

18800

133

13

572

926

19208

408

14

376

1302

19347

139

15

498

1800

19502

155

16

247

2047

19417

(85)

17

370

2417

19595

178

20

412

 2829

19906

311

Clearly Caution needs to be exercised at these levels as some Alerts have popped as as below

  • All the Low Beta Defensive FMCG Blue Chips,HUL,Colgate and ITC moved up strongly by over 4% today
  • On a Historic basis Sensex P/E climbs towards 24,P/B towards 4 and Dividend Yield drops to 1
  • IPO Market is heating up…there are a record 11 Issues this week…the grey market has hotted up
  • Suspicion mounts that the FII Inflows could have been orchestrated for the short term….maybe just a coincidence that PSU,Coal India’s Mega IPO opens next month…so sentiment must be kept propped up

Tommorrow you will see Sensex open up past 20000 and Nifty past 6000….Sensex may try  to even reach 21000 inside a month and cross the all time high of January 2008…then what !….just tread cautiously…rebalancing your portfolio to return to pre decided asset allocation levels….booking trading profits and remaining in cash for awhile….hope for a significant correction to 16500-17500 levels to commit yet again…..ultimately Valuation always remains the critical criteria….we are getting expensive…Too many Small Cap and Mid cap Companies are beginning to make Heavy Promises and announcing plans to raise funds…..Too much Liquidity driving up our Indices too fast for Comfort  

Just Tread Carefully in the Short term as Liquidity is driving the Momentum and Sentiment…and not Valuations

These FII Inflows are strengthening our Rupee…it’s Rs 45.70 to the Dollar today

Don’t be in a position where you are left holding the Straw  a month or two down the line !

Would not be a bad idea to consider hedging and buy some cheap put options as Sensex and Nifty keep surging…better to be safe than sorry….we have had some shaking precedence on this in recent years 

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