Tuesday, July 1, 2008

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Another Bloodbath Happened Today

Our markets started this new quarter which could be notable in the future, with continued bloodbath. Today’s bloodbath is worse than yesterday and that too even when US market closed the quarter with a quiet session in the end. Dow Jones was up all through the day hovering around 0.55% and ended without gains at the close. But sadly enough our markets had witnessed a great bloodbath today. I have seen many stocks butchered today worse than the gap down day of last Friday. There was simply no respite for the markets.

If I settled as a day trader, I would have made good killings in these days. These kind of quiet but cold blooded days are what are required for a professional day trader.

As I had sold off most of my stock except 7% still stuck, I didn’t feel the pain today. In fact IFCI which fell yesterday by 9.5% had fell down by 13.5% today. Rajeshexpo down by 14.5%. Arvindmills also down by around 15%. RNRL went down further and Ansalinfra is a regular new low maker. It is only for a single day that it takes a break from making a new low. It is a potential loser for a buyer. So it is in a strong down trend as is the case with IFCI. It is dangerous to buy them now. Even Cairn is also down by 5% today. Suzlon, eleconengg, sasken, jphydro, jpassociat, adlabsfilm, relinfra, jswsteel(14%), adlabsfilm(14%), the list goes on. There doesn’t seem to be any expectable defensive stock today.

The safer bets I think for the medium term can be found in cairn, orchidchem, spicetele, reiagro, hindoilexpo. The only danger with them is that they can also change their trend for some reason unknown to us. A strategic entry into these stocks on a good day with reasonable stoploss for defense will make a good bet.


Perhaps the most interesting thing that happened today is that while the market broke down today with Sensex tanking 500 points and Nifty by 144 points, both FIIs and DIIs remain net buyers though by about 200cr-160cr. This is in the cash segment. But I don’t know what caused this restless fall. That smells to me like a crash is in the offing with widespread panic. Nevertheless another interesting thing that happened today is that Rupee depreciated sharply from 42.96 yesterday to 43.42. I don’t know what RBI was doing today. Either oil companies must be buying too many dollars as Crude oil is sitting happily above $140, or FIIs must have done big play in FnO or elsewhere.

It is notable that the part of the rally in the Crude oil prices is really driven by the buying by domestic oil corporations and may be similar case with other Asian oil importing economies. This is a fact as I remember rupee being depreciated sharply one-two months back before petro prices were about to be hiked and the companies are buying dollar heavily to meet the rising local demand for fuel.

That means there is more danger in the future as the depreciating rupee and appreciating oil because of rising demand from oil importing countries and China’s desperation for Olympics, are going to send the inflation by a modern rocket. Now I am expecting inflation to cross 13% despite whatever government has done/not done to contain it.

This means more interest rate hikes are inevitable as RBI will be sent into a check mate situation without other options. Whatever it does, a massive deterioration in IT and outsourcing companies is one surefire thing that is going to unfold in the future. When this unfolds hell will break lose but the good part of it is the housing prices will decline steadily like in the US. This makes them affordable for few people who sustain their profession.

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