Home > Macro Trends, Market View, NIFTY Strategy > Dollar at fresh lows,crude at new highs and NIFTY at new highs

Dollar at fresh lows,crude at new highs and NIFTY at new highs

Thursday, November 1, 2007 Leave a comment Go to comments

These days even a non supporter of trends might start believing in them. The same old story is getting repeated.

A few days back we had discussed how a downhill for dollar has begun and it looks like there is no bottom in sight for the greenback. At the same time crude is hitting fresh highs at $96! And with the 25 basis cut by the US Fed yesterday, the emerging equity markets might roar again.

The falling dollar holds much significance as it forces international investors to withdraw their dollar assets and put them into commodities and emerging markets. In September, international investors had sold $70 billion of equities in the US market and most of it flowed into India, China and the commodities. This is a big trend and might continue in the coming times.

The biigest risk to this market remains “capital flow control” by the finance minister. Exporters are being badly hit and there has been a loss of jobs . All one can hope is that these doesn’t snowball into some kind of political issue and forces the government to take harsh steps to stem the flow of dollars into India.

Coming to markets, I had written last week that markets are planning to make a big move towards higher levels. To put a number to this move is not possible. When I tell possible targets, people feel surprised. So let the surprise remain while we ride this uptrend.

So what can one do if one is invested or wants to invest now? My suggestion is simple – This is a good time to churn your portfolio and evaluate it again.This is because this rally might get narrower as we proceed forward. If you are not in the “right” stocks, you might not benefit much form these moves.

If you have cash, then either you can take some medium term momentum bets or if you can’t handle the risk just stay in cash. Let me give you an example -many of my clients were able to pick BHEL at 2000 bucks during the famous “P-Note correction”. So just wait like a chameleon and strike at the right time!

I am also thinking as to what can bring a correction this time? 🙂

What do you guys think?

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  1. ashish ji
    Friday, November 30, 2007 at 7:23 am

    SENSEX WILL REACH 10,628 LEVEL IF FII/FDI withDRAW FUNDS (as OF Nov 30, 2007 7:23AM)

  2. sagecapital
    Thursday, November 29, 2007 at 8:34 pm

    Azad- I don’t think anyone will even dare to take a guess 🙂

  3. AZAD
    Thursday, November 29, 2007 at 8:03 pm

    Pl inform – if FII and FDI decide to withdraw their funds , what will be the magnitude of impact on Indian Shares ,MF’s ,……

  4. amol
    Friday, November 2, 2007 at 5:41 pm

    Hi,

    Can you tell me in simple terms that why oil/Gold rises when dollar get weeks?

  5. sagecapital
    Thursday, November 1, 2007 at 5:37 pm

    Ashish- I am wondering as to who will get allotment. The company doesn’t look that great. I feel it will fizzle out soon!
    This stock shall not make into my long term client portfolios.There are much better bets available.
    Short term- May be yes!

  6. ashish ji
    Thursday, November 1, 2007 at 5:21 pm

    Eventully RELIGARE sub BE oversubscribed almost 170x times. Sage this LOOKS GOOD for short term trade RIght? People must rush for this upon listing … I’LL BE ONE OF thEM .. 😀

  7. ashish ji
    Thursday, November 1, 2007 at 11:09 am

    LIQUIDITY AND BULL MARKET = To me it sound like OLD chicken & egg problem who came first… D:

  8. sagecapital
    Thursday, November 1, 2007 at 11:03 am

    JSPL..Yes..
    Nice stock to ride..
    And bull markets are driven by liquidity.Its all about money chasing returns. Have you ever seen liquidity in a bear market?
    I feel amused by the statements that this market is going because of “liquidity”. I feel liquidity comes as a result of bull markets.

  9. Thursday, November 1, 2007 at 10:59 am

    Since this is a liquidity driven market, some drastic steps by the powers that be to curb liquidity can be the plausible cause of next correction. Though it was quite likely that rupee was on a long term uptrend and we would find it at 38 and 37 some years down, the pace of fall is worrying. Anyway, Sage, do you track two other rockets, which I am riding since 3500 levels…Hercules hoist and Jindal steel& power?

  10. ashish ji
    Thursday, November 1, 2007 at 9:53 am

    SAGEEEE bhai__ YOU KEEPIN AN EYEEE ON RELIGARE IPO DATA???>> ALREADY 32x overSUBSCription. TODAY last DAY and HISTORY SAYSS LAST DAY PEOPLE RUSH LKE ANYTHIN….. I THINK THIS ONE IS GOING TO END UP BIG TIME OVERSUBCRIBED >>>> 75x TIMEs maybw …. I’m GLAD I avoid it. UNnecessaRILY held money FOR LONG TIME hai na …

  11. sagecapital
    Thursday, November 1, 2007 at 9:50 am

    The premiums are there because SBI has a FII cap so which ever FII wants it, they need to pay a premium to their FII from which they buy.
    SBI is in a long term uptrend. I am long on the stock.
    SBI has huge unlocked “potential” according to the longer term investors 🙂
    I am gonna ride the stock as long as it goes to the moon!

  12. Murtaza
    Thursday, November 1, 2007 at 9:45 am

    A small query — a link on the blog– on the right side says Market Updates — FII to FII trades SBI Trades at a 21% premium.

    What could be the reason for this 21% premium to the spot price. Many stocks are traded on FII to FII basis at premiums (at varying percentages).

    Can we take a position based on this (in cash – of course with a holding time of say 2-6 mths, i suppose) or is it some other reason for the premiums?

    Thanks

  13. Rahul
    Thursday, November 1, 2007 at 9:11 am

    Hi Sage, Few months back i read an interesting artciel mentioned by you on Sub prime crisis and it was beautifually expalined there. The avg loss was estimated to be around $150billion. I am surprised where are all those billions of loss vanished? No fund house is coming up with any sub prime crisis. I feel that is the only signal which can crack the markets worldwide. what do you say?
    Thanks

  14. sagecapital
    Thursday, November 1, 2007 at 8:59 am

    As China is more export led economy, they can’t afford a stronger RMB.
    There interest rates are touching 13% but still the growth is not coming down!
    In India the interest rates might not go up because that might encourage more dollar flows.

  15. Hari Swaminathan
    Thursday, November 1, 2007 at 8:39 am

    China has an open door policy on FDI and FII – They don’t restrict it in any way. They can do this because their currency is pegged to the USD (a fixed rate of 8.2 RMB to 1 USD). By fixing the exchange rate, they don’t have to worry about too much money coming in, because the only ramification of too much money coming in will be to create a stronger RMB. But that is fixed (Classic Chinese style strangle..). Of course by doing this, they may be inducing other problems such as inflation etc but the Chinese are willing to live with that. What they are not willing to live with is a strong RMB because that will kill exports which is the backbone of the Chinese economy.

    They did let the RMB appreciate a few percentage points a few months ago to contain international pressure. They don’t have to do anything to manage the price band of the RMB USD rate. IT IS FIXED, and can only move within this band. Once it hits a border condition, it cannot go further. Its similar to the Circuit breaker we installed on the BSE which got triggered a week ago..

  16. sagecapital
    Thursday, November 1, 2007 at 8:04 am

    Hari- I was wondering how China manages to control huge inflows. Also how how do they manage to keep their currency pegged at predetermined price band?

  17. Hari Swaminathan
    Thursday, November 1, 2007 at 7:33 am

    Sachin,

    As you have mentioned, I also feel the biggest risk is the FM taking some drastic measures to check FII inflows into the country. Look at the headlines in Economic Times today (Quote) –

    “The Reserve Bank of India and the finance ministry are working on a concept paper which will look at the feasibility of levying a sterilisation tax and auctioning the limited foreign loans quota to help moderate the inflow of funds through external commercial borrowings (ECBs).”

    What in the world is a “Sterilization Tax” – gotta hand it to these guys to come up with this stuff. These kinds of random measures won’t be good for the long term. One of these moves will end up disrupting the market sentiment in a big way.

    Hari

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