Monday, January 11, 2016

Nifty: Hope prevails

First random thought this morning
This winter has been unusually bright and warm. This has certainly extended the Christmas festivities for the urban populace in North India. The farmers are though a worried lot. Wheat farmers in Punjab, UP and MP who have been braving drought for past two years appear to be throwing in the towel.
Many agricultural tenants have defaulted on their obligations and many distressed marginal farmers have put their land on the block.
Thought for the day
"Wisdom begins in wonder."
—Socrates (Greek, 469-399BC)
Word for the day
Unputdownable (adj)
(especially of a book or periodical) so interesting or suspenseful as to compel reading.
(Source: Dictionary.com)
Malice towards none
If you have to name just one, what in your view would be the  most critical problem afflicting India presently?

Nifty: Hope prevails

As the benchmark indices tested the lows recorded in September 2015, the broader markets demonstrated remarkable resilience.
The current level of outperformance of mid and small cap is in fact widest since the current up move started from late August 2013.
Juxtaposed with the rising retail participation, strong response to new issues, improved market breadth and consistent domestic flows into the market, it is clear that:
(a)   presently the equity is the most preferred asset class with domestic investors;
(b)   despite uncertainty over economic reforms, and poor corporate performance the domestic investors have not lost faith in equities and remain mostly hopeful of a imminent recovery;
(c)    given the strong activity in poor quality stocks, the dominance of greed over fear is evident.
As I have been pointing out in recent months, historically, this outperformance of low quality and small cap has invariably marked the cyclical peak for the markets and is usually followed by a sharp correction.
It is though difficult to put a timeline on expected sharp correction in broader market, I will still hazard a guess - between 20th February and 20th May 2016.
 
 

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