13-July-2009

Markets tanked after the announcement of the Budget. There was nothing much that can be done since the FM was struck between the devil and the deep blue sea. When markets build optimism based on illusions and not on reality, such reactions are bound to happen. Both sensex and nifty lost close to 10% week on week as almost every sector gave in to the selling pressure. ITC, Hero Honda, Ambuja Cement were among the top Nifty gainers while Suzlon, Reliance Capital, Reliance Infra, Unitech, DLF, ICICI Bank, R Com, Tata Steel, L&T, Siemens, Axis Bank, R Power and SBI lost anywhere between 15-30% week on week.

The fundamentals of the economy are certainly looking bleak. For me the major problems are unemployment, the security threat from our neighbours and the effect of global recession on India. There are talks of green shoots sprouting up all around but we are no way near to a ‘U’ shaped recovery. The rises that we’ve seen do not support any recovery theory. There are already rumours in the air that a downgrade on India is likely in the immediate future. Every positive news must be sold into and we do not expect the markets to stage a very strong recovery from these levels. The momentum would remain on the downside in the short to medium term. Our markets may open with a gap down going by the global cues but we may see recovery towards 4000. On the upside 4020 is a strong resistance and any move above 4000-4200 should be utilized to create medium term short positions. Sell on rises and maintain short positions. Avoid any long positions. Sell not for today, always sell for tomorrow.