Tuesday, November 3, 2015

Five reasons markets are nervous

"Weeds are flowers too, once you get to know them."
—A. A. Milne (English, 1882-1956)
Word for the day
Ferhoodle (n)
To confuse or mix up
(Source: Dictionary.com)
Malice towards none
The hot topics these days is "intolerance". USA, RBI, Moody's, Intelligentsia, Artists, Politicians, Media, Twitterati,  and the government - all are talking about this.
The more I hear the debate - the more intolerant I'm becoming.
First random thought this morning
"Heads I'll go, tail I won't"....."Ooops! its tail."...... "No I'll take best of three:)" ....."Ooops! it's tail again(:"....."It's final now. I'll take best of five:)"
Remember playing this trick to yourself ever.
Many politicians play this trick by terming each state legislative election a "semi-final" before next general election.....30 semi finals to what itself could be described as semi-final if the incumbent wins!!!!
Many habitual punters (euphemistically called short term investors) too play this game every time their bets go sour.
 

Five reasons markets are nervous

The enthusiasm seen amongst market participant during early October has cooled down in past few trading sessions. A variety of factors are responsible for sudden dampness in the sentiments.
A discussion with some senior market participants brings out the following five prominent factors bothering the investors in Indian equities, though not necessarily in the same order:
(1)   The corporate performance has not been encouraging. The investment demand was not expected to witness any major recovery, but the consumption demand also appeared to have surprised the market negatively.
       The most worrisome part is that the management's of leading companies in both the segments (capex as well as consumption) are not hopeful of any major improvement in near future. Some exporters though have expressed hope of improvement, but the global economic sluggishness is making it difficult to accept their guidance at par. Despite relative attractiveness, the chances of any material re-rating of Indian equities therefore appear dim.
(2)   In its latest statement on 28th October, US Federal Reserve has put the rate hike agenda firmly back on track. Consequently, the risk-on rally that took place post Fed's September meeting is fizzling out. Commodities', EM currencies, bonds, gold etc. all have corrected sharply post Fed's latest statement.
       The foreign flows have turned negative last week after remaining positive for past three weeks. A December hike might cause a material correction in EM asset prices, including Indian equities and INR.
(3)   The political discourse in the country has taken turn for the worst. The incumbent government has been put on defensive over some socio-religious issues, clouding the economic agenda somewhat.
       The perception of potential derailment of economic agenda has gained so much currency that even global rating agency Moody's has to take note of it.
(4)   The elections in Bihar are proving to be the most bitter in recent times. The rising animosity amongst leaders of various parties is obliterating the chances of wider political consensus on key economic issues. Irrespective of the outcome of Bihar elections.
       The expectations from the outcome of winter session of the Parliament are now minimal.
(5)   Technically, market has weakened materially. The market momentum is very low as volumes and volatility have fallen materially. On monthly charts, Nifty has formed a strong resistance between 8250-8300 range. Failure to cross this range sustainably by end of 2015, will make this a medium term resistance zone, clouding the market outlook for 2016 as well.
...more on this later this week

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