"The innocent are so
few that two of them seldom meet - when they do meet, their victims lie strewn
all round."
—Elizabeth Bowen (Irish,
1899-1973)
Word for the day
Semaphore (n)
An apparatus for conveying
information by means of visual signals, as a light whose position may be
changed.
Malice towards none
To a common man, who grows
with stories of the valor of James Bond (more recently Tiger) and strongly
believes in infallibility of MI6, CIA, KGB, Mossad, RAW etc., the recent news
flow regarding Nirav Modi comes as an unpleasant shock.
First random thought this morning
Like in Greek mythology, all Indian politicians are Demigods. They
never make mistakes. All their decisions and actions are totally dedicated to
the welfare of common people and they are incapable of doing anything wrong or
something that is prejudicial to the public interest.
At least I have not seen anyone admitting to, or apologizing for,
a wrong decision or deed that may have hurt people. Arvind Kejriwal once
admitted that his resignation from CM office in 2014 was a mistake. But he was
perhaps referring to the interests of his party and not common people.
And then we have the audacity to claim ourselves followers of
Mahatma Gandhi, or critics of Mahatma Gandhi, who had enough courage to admit
even his most personal failings and weaknesses publicly.
Sector rotation a trading opportunity
Considering that the subject is attracting too many arguments and
becoming too time consuming, I would like to close the discussion with the
following final comments.
1. I believe that the
market cycle that started on 28 August 2013 (Nifty closing 5285) has already
peaked on 29 January 2018 (Nifty closing 11130). The process of bottoming of
the cycle has started, and may last many months. In this process, Nifty may or
may not record a level higher than 11130. The bottom however shall occur in the
8250-8500 range.
2. The mid and small cap
indices may fall 20-25% more than Nifty in the process, thus erasing most of
their outperformance in past five years.
3. We may see massive
rotation of sectors and size in the bottoming process, e.g., from over owned
financials & commodities towards under owned Pharma, and from mid and small
caps towards large cap etc. But this rotation might not be indicative of the
leadership for the next market cycle. The rotation in that sense might only be
a trading or defensive strategy.
4. I shall inter alia
keep a close watch on the following data points for tracking the progress of
the bottoming process:
(a) RBI panicking – watch
for couple of unscheduled announcement.
(b) Collapse in G-Sec
yields below 7%. This could be preceded by a sharp spike in yields and major
unexpected spike in NPA provisioning.
(c) Crude prices falling
sharply.
(d) Nifty trading 5% or
more below 200EDMA for a week.
(e) Nobody talks about
stocks at social gatherings you attend, and you get a strong urge to sell the
stock you have been holding for more than 5years.
(f) There are few large
daily moves, ideally over 2% on closing basis, in Nifty.
(g) S&P500 in USA
falls below 2500 and US 10yr yields breach 2.5%.
(h) USDINR trades above
Rs70 for a week.
(i) BJP losses both
Rajasthan and MP assembly elections.
(j) The Nifty earnings
revision ration falls below 0.7.
(k) INVIX trades above 30
for a week or so.
(l) Advance Decline ratio
falls below 0.65 for two consecutive months.
(m) Domestic MF net flows
are less than Rs5000cr for two consecutive months.
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