Immediate market out look: Never in the history of our market, you have seen shares of blue chip cos. available at such attractive rates. Those who thought so and bought just a couple of days back ae now regretting as these shares have fallen further.
The theory of buy and hold also does not work. Now the question which is in every ones mind and that is not that easy to answer is whether our markets have touched the bottom or atleast somewhere around.Let us anwer this as per the technical analysis. Kindly refer to the attachment on history likely to repeat itself.As per technical analysis,
we were in similar situtation two times earlier where our markets have fallen almost 50 to 55% and from that point, they have risen like a phoenix.
Situation I: the Sensex that was 4467 on 22.4.1992 crashed to 2037 on 26.4.93 a fall of 54% from the high. Even though it did not fall further, it took seven years for the Sensex to touch a new high of 5933 on 11.2.2000
Situation II: The Sensex crashed from its new high to 2600 points on 21.9.01. This is again a fall of 56% from its top.The current scenario: Sensex touched an all time high of 20873 as on 8th Jan 08. From this top, the Sensex has come crashing to 10239 as on Friday 10 Oct. This is a fall of 51%.
Applying the earlier experience, we may assume at the most the Sensex may further fall 5% and signal the bottom.
IN WHAT WAY THE SITUATION IS DIFFERENT TODAY: Harshed Mehta and Ketan Pareikh initiated the earlier two falls. Today we are not alone. The entire globe is in a financial crisis. This is not a making of our own. Still the ripple effects are going to be felt by India. In America, banks do not trust each other to lend money. On Friday, same thing was happening in India. There were reports that ICICI had to borrow money at 20% interest.Most of the efforts of the Govt. and the RBI to control inflation has now resulted into a cash crunch which may end up into recession which is worst than inflation. Already there is slow down and lack of demand for products. Prices of steel and cement are falling every day demand for autos have disappered. Diwali sales are at very low ebb. In short, no one wants to take out money from his or her pockets.
FII NEED MONEY WILL SELL AT ANY COST: As pointed out earalier the Sensex reaches the bottom after a fall of 50 to 55% from its top was correct in the earlier two occasions. This time there is a twist. The FII are still holding huge chunk of shares and they have to sell as they are in need of money. The sheer money power of FII was responsible for pushing our Sensex from a low of 6000 to a top of 20873. Now the markets are in reverse gear, as they have to sell.
WHAT IS THE WORTH OF FII HOLDINGS? FII investments in Indian equities, from the time they commenced buying in India, has amounted to $56 billion as on Friday, SEBI data showed.
They have already sold $ 10 billion worth shares until Friday 10 Oct.Analysts expect that out of the remaining $ 48 billion at least another $18 billion (almost double the amount of what they have sold so far) will come for sales. This $ 18 billion has entered the Indian shores at the time the Sensex rose to 18000 points some times in Oct 07.There are other long terms FII like pension funds, which may hold out for another 5 to 7 years.
Hence it looks it is very important to cut losses or book available profits even in such a situation and be prepared for the worst to come to make any purchase. Nothing is going to run away.Already TV channel analysts are recomending short sales in counters like State bank. Shares quoting in four figures are mostly with the Fii and they are going to be hit continuously.
These are the most abnormal times and no logic will work. Only the time can tell where we are heading
