Vijay Kumar Gaba

Tuesday, October 25, 2016

Waiting for the tide to turn

Thought for the day

"In a war, you must hate somebody or love somebody; you must have a position or you cannot stand what goes on."

—Robert Capa (American, 1913-1954)

Word for the day

Thunderstruck (adj)

Overcome with consternation; confounded; astounded, e.g., He was thunderstruck by the news of his promotion.

Malice towards none

Is MSY's family taking Ram and Ramayana too seriously?

First random thought this morning

The way Virat Kohli is going, he may obliterate many great names from the Cricket's record book. The age is on his side and he is already a youth icon and worshipped ahead of the greats Sachin & Lara.

I wonder will that automatically entitle him for a Bharat Ratna, or he would need do little more to earn the honor!

Waiting for the tide to turn

Indian equity markets started attracting interest from common public in mid 1980s' when the erstwhile Controller of Capital Issues began to liberally allow initial public offers (IPOs) at fair value of companies and a spate of IPOs followed. Prior to this it was mostly a domain of higher echelon of the society and employees of MNCs who were allotted shares as part of mandatory dilution under the provision of Foreign Exchange regulation Act 1972 (FERA).

In past three decades Indian market has seen three major market cycles. The most notable bull markets have been in 1989-1992 and 2003-2007. In these two bull phases S&P BSE Sensex had returned approximately 5x to 6x returns from the lows of the immediately preceding bear market.

The current bull market that started in March 2009 is inarguably the longest one. Interestingly it follows the shortest bear market (January 2008 to March 2009) and has already yielded 3.5x return (8k to 28k).

I may lack any knowledge of data analytics beyond basic operations of MS Excel, but intuitively I know for sure that all market cycles in India so far have been a mirror image of a global trend.

· Massive commodities cycle in late 1980s fueled the global rally in commodity stocks. The nascent and closed Indian markets also participated.

· The mammoth global credit cycle in 2003-2007 that was created to stem the losses from the bust of dotcom bubble percolated to emerging markets and fueled a capex driven rally. The rally eventually ended with a colossal sub-prime crisis. Indian financial system is still buried under the debris.

· The unconventional monetary policies (QE and ZIRP) followed by the global central bankers to stabilize the global financial system in the aftermath of the financial crisis have fueled the rally in global markets since 2009.

The current bull market, like the earlier ones, shall too end with the tide turning in the global markets. In my view, no one should have any doubts in that.

More important given the rise in the degree of integration with the global markets since previous instances, our markets should feel the tremors right away with virtually no reaction time available.

The questions which are bothering my mind presently are:

(a) When the global tide is likely to turn?

(b) What will signal the turn in the global tide putting an end to the current market rally?

(c) Is there any likelihood that in near future India will have her own bull market as US and Japan had in Post WWII era?....to continue tomorrow

Tuesday, October 18, 2016

Smart cities - Smart people

Thought for the day

"A work of art that contains theories is like an object on which the price tag has been left."

— Alexander Pope (English, 1688-1744)

Word for the day

Lexicon (n)

The vocabulary of a particular language, field, social class, person, etc.

Malice towards none

US presidential election is turning out be quite like Bihar assembly poll last year.

Do you also see similarity between a variety of women accusing Trump of outraging their modesty (in some cases 20-30yrs ago) and the spate of intelligent people returning their awards?

First random thought this morning

The present Indo-Pak policy of China is eerily similar to the Indo-Pak policy of USA till a few years ago.

China wants to have good relation with India for mutual economic benefits, and wants to keep Pakistan in good stead for geo-political reasons. Much like the USA in the decades of 1980, 1990 and 2000.

I wonder, why is it necessary for China to repeat history to learn from history?

Smart cities - Smart people

I had the opportunity of visiting Andhra Pradesh Capital Region last week. Mostly located between the cities of Vijaywada (Krishna District) and Guntur (Guntur District), the area is fast emerging as a new hotspot of economic activity.

The visit was quite revealing in the sense that it highlighted to me the great economic opportunity and lack of vision in availing this opportunity.

I thought it pertinent to share my observations with the readers on three counts - (a) It lets them make a realistic evaluation of the political promise in the country by applying an appropriate discounting factor; (b) It highlights the great economic potential that is going unexploited; and (c) It highlights some of the key socio-economic trends that may not be necessarily local to this region alone.

The Andhra Pradesh Capital Region (APCR) is being propagated as one of the smartest urban agglomerate in the country. But the planning and execution so far does not suggest it to be really evolving into the one. The planners, it seems, have learned little from the degeneration of Bengaluru, Gurugram and Mumbai suburbs into a civic nightmare. For example, consider the following:

1. The Andhra Pradesh Capital Region (APCR) is proposed to be served through Gannavaram Airport near Vijaywada city, and Vijaywada and Guntur railway stations.

Today, it takes anywhere between 1-2hrs to travel the distance from the airport. But as the process of shifting the capital accelerates, the traffic may rise multifold. To reach APCR from airport, one must cross the Krishna river. No matter how many bridges are built, traffic conditions shall remain poor.

Vijaywada railway station is already one of the busiest in the country. Given its location and plans for expansion, the area is certain to become a mess in 10years.

2. With 31k people per sqkm, Vijaywada is already one of the most densely populated city globally. So far Vijaywada and Guntur have been populated mostly by traders and rich farmers. Real estate development has become a major commercial activity in past 3-4years. The latest plans include bringing the ITeS sector to the region in a big way.

The developments are being marketed to the people as massive economic opportunity. But no one is telling people to prepare for a dramatic change in their lifestyle. A city where "anywhere-to-anywhere" travel time had always been 10-15minutes, it is painful to spend hours on the roads. People are already getting restless. Drivers honk like crazy. Soon we will have cases of road rage.

3 Smart cities should mostly be about smart people. My enquiries with people suggest that there is no plan to train and prepare people for the transition, that is inevitably going to be painful and traumatic, especially for the older people.

================

As the pilot announces the commencement of decent on to the Gannavaram Airport (Vijaywada), the outside view becomes mesmerizing. The lush green paddy fields appear like a large football stadium with green turf. The banana and mango orchards on the sidelines provide the perfect setting. The region is inarguably one of the most beautiful in the country, as good as Goa and Kerala.

Andhra Pradesh has the longest coastline in the country, with a number of serene beaches. The state also has many scared temples like Tirupati Devsthan. Intuitively, tourism, both religious and leisure, should naturally be the mainstay of State's economy.

However, nothing on the ground suggests that anyone is even thinking about this. There are talks of industrial corridors, IT parks, agro parks but nothing on this huge potential.

Manglagiri in Guntur district (15kms from Vijaywada) is a temple town. A very sacred ancient temple of Lord Narsimha (an incarnation of Lord Vishnu) is situated here on a sleeping volcano. The town is also famous for handloom sarees and dress material.

The town has absolutely no tourism infrastructure. No hotels; narrow lanes; no parking space; no Hindi/English speaking drivers or guides - nothing.

Simlarly, Vijaywada has Kanak Durga Temple, one of the most prominent amonsgt 52 Shakti Peethas in the country. Again no tourist infrastructure.

Both these temples, and many others in the region, have the potential to become economic magnets like Tirupati, Vaishno Devi, etc. But does anyone care.

The rural areas in Krishna and Guntur districts are as beautiful as Vietnam, Cambodia and Taiwan (the popular tourist destinations these days). But no one seems to care.

I had the privilege of spending a day with M. Vindo Babu (a road contractor) and his wife Lakshmi Tulsi (an academician). The couple runs a school for 500 children in Vijaywada. 300 of these students are funded by the couple (fee, uniform, meal, post school coaching).

Lakshmi, the principal, told me that the normal schedule of schools in Vijaywada (and elsewhere in the state) is usually 10-12hrs even for middle classes. These schools are run as factory for producing medical, engineering and accounting professionals. A majority of schools even do not offer humanity as a subject in senior classes.

Tell me without knowledge of their history, geography and Hindi - how these children could be expected to make a career in tourism as a industry. This factory model of education is also destroying the local arts and cultural traditions - something for which southern Indian states are traditionally reputed for.

===============

I observed some socio-economic trends during my recent visit to Andhra Pradesh. Many of these trends that may not necessarily be local to the region. These trends may rather be prevalent in most societies across the country; and therefore could have significant economic and investment implications.

I may highlight some of these trends as follows:

(a) There is hardly any family in the region that does not have a member working or settled in a foreign country. Going abroad for studies and work is no longer a status symbol. It has become as mundane a part of the middle class life style as preparing for competitive examinations.

(b) There are numerous instances of young people returning from foreign shores or leaving corporate jobs and taking up agriculture as a profession. Predominantly cash crops, organic farming, farm automation, integrated farms, staggered selling of produce to maximize returns are key features of the farms being cultivated and managed by these professionals. In Guntur, for example, almost 25% farmers are now not selling their turmeric crop within 3months of harvesting.

(c) Real Estate development that gathered tremendous pace in past 3-4years is taking a pause. Liquidity is badly stuck in the half completed projects. Investors are losing patience as opportunity cost is rising. There is huge latent demand from actual users - who are preferring to wait for more price correction. A 1-1.5% fall in interest rates and higher liquidity in the hands of investors and developers could make the actual user blink. The first such instance could actually soon turn into a stampede.

(d) Obesity is becoming a class wise phenomenon. Young students and professionals are mostly health conscience and preferring healthy food and habits. While the middle aged, businessmen, government employees, and service providers are showing a tendency to become obese. Size zero is no longer a fashion.

(e) Even in traditional societies of South India, religion is fast becoming more a matter of fear & desire rather than spiritual attainment and social order.

(f) Most traditional rituals are fast becoming mere formality to be performed mechanically without understanding the nuances. The majority of priests and the current generation of elders does perform religious and traditional rituals more out of the fear of punishment for non-compliance rather than as an enhancement of quality of life.

(g) The fetish for gold and precious stones is still uncompromising. But a significant portion is now imitation. Younger people even in rural areas do not see gold as a good investment. People prefer iPhone a better wedding gift rather than gold jewellery. A temple trustee said - they prefer bonds & cash over gold as donation.

===============

In past three days, I have shared some of my observations made during my visit to the Andhra Pradesh Capital Region (APCR) with the readers (see here). The objective was to help readers make (a) a realistic evaluation of the political promise in the country by applying an appropriate discounting factor; (b) highlight the great economic potential that is going unexploited; and (c) highlight some of the key socio-economic trends that may not be necessarily local to this region alone.

I may conclude the series by summing up my observations as follows:

1. There is huge gap between the political promise and the execution capabilities. A discounting factor of 50% to 67%, depending upon the area of promise, needs to be applied for incorporating the promise into any investment strategy.

2. The huge unexploited economic potential of the country is now part of the folklores in global markets. There is little evidence that the politicians and administrators have the mindset and/or ideas which may be pre-requisite for exploiting this vast potential.

3. The chasm between the political vision of the Indian society and the actual socio-economic practices is widening rapidly leading to material rise in the cases of disagreement, defiance and non-compliance.

Trust me I am not trying to be a mere Gadfly here. In fact I do not like gadflies. The idea is to gather inputs that are important for laying assumptions for formulation of an appropriate investment strategy. Offering suggestions to the policymakers, based on the observations made during various journeys, is only incidental.

Let me now offer some illustrative suggestions to the policymakers (the Governments in Andhra Pradesh and Center in this case).

A. Think big and create world class tourism infrastructure in the state - something that will beat Thailand and Singapore. Do not waste resources and efforts to replicate the industrial base left behind in Telangana. Motivate (not force) people to learn Hindi, English and many other foreign languages. Promote and subsidize schools that teach culinary skills (food from across the country & globe), languages, hospitality management. Plan roads that would be sufficient even after 50years. Build an eight lane elevated circular express encircling the city, with exit planned in a way that no one needs to travel more than two kms outside that expressway.

B. Train local people how to live in a global city - etiquettes, commercialization, civic standards.

C. Assign premium to your culture, traditions, history and religion. Adapt it to the modern times and technology, while maintaining their sanctity and purity.

D. Transform all factories (aka Schools) into centers of learnings, where kids can study whatever they like.

Friday, October 7, 2016

"Beginning of the end" or a "New beginning"

Thought for the day

"Man never thinks himself happy, but when he enjoys those things which others want or desire."

— Alexander Pope (English, 1688-1744)

Word for the day

Potboiler (n)

A mediocre work of literature or art produced merely for financial gain.

Malice towards none

Congress is desperately trying every trick in the trade to stay relevant in UP.

Genuflecting to Ms. Mayawati is perhaps the only thing left!

First random thought this morning

The online retailers are joyously claiming huge growth in sales this season. Their offline counterparts are echoing their sentiments.

This may therefore be a case of some shift of customers from off-line to on-line; and not necessarily reflect the growth in consumer spending.

Regardless, the customer is benefitting from lower prices and manufacturers may also benefit from lower sales and distribution expense. The retailers in both the worlds may end up funding the Diwali of producers and consumers:)

"Beginning of the end" or a "New beginning"

Global asset prices have been all over the place in past three months; diverging materially from mean in some cases. For example consider the following:

(a) After rising 8% from the lows of Brexit vote (US$1256/oz) gold prices have fallen to the same level. (Some analysts are now suggesting that it may still be overvalued by 20-25%, (See here)). Base metals like copper have also seen similar trends.

(b) After falling 20% in July (~US$42/bbl) from highs of early June (~US$52/bbl), the Brent crude prices and are almost back to those levels.

(c) The benchmark 10yr US treasury yields fell 25% from highs of June (~1.84%) in July (~1.36%) and have recouped most of the ground since.

(d) Equity prices have seen a wider divergence. Nasdaq (~10%), FTSE (~9%), Nikkei (~10%), Hang Seng (~16%) have seen material gains in past 3months; while most EM indices (including) are higher by 3-5% in this period. S&P5001 and Dow Jones are up just ~2% in past 3months.

(e) Currencies have also seen a wider and diverging movement against USD. While EUR and CHF are almost flat, GBP has depreciated materially and JPY has appreciated. CNY has depreciated ~1.5% and INR has appreciated ~1.5% over this period.

It is easy to guess that the life of most market participants traders must have been quite challenging and less rewarding in this period.

If someone asks me, I am completely at loss in understanding the reasons behind such volatility and divergence. However, I must say, I am clear about the following three things:

1. The conditions (including policy narrative) that have prevailed since collapse of Lehman Brothers in autumn of 2008, are set to change in next few years. You may call it "beginning of the end" or a "new beginning", as you like.

2. The central bankers have propped up many a bubbles in the global markets since 2008 - including in currencies, gold, bonds and equity markets (more on this next week). The major challenge therefore would be to deflate this bubbles in an orderly fashion.

I am unable to lay my hands on any empirical evidence of such orderly deflation of a bubble. Nonetheless, I accept that all things once happen for the first time.

3. The geo-political realignment shall have a role to play in the "next global market era." I am inclined to order some cold war era books (both fiction and non-fiction) to get some guidance as to how the global markets may look like in next 20years. As things stand today, India seems set to play an active role this time (Nehruvian legacy of non-alignment has been given a quiet burial).

Thursday, October 6, 2016

Show me the evidence

Thought for the day

"Some old men, continually praise the time of their youth. In fact, you would almost think that there were no fools in their days, but unluckily they themselves are left as an example."

— Alexander Pope (English, 1688-1744)

Word for the day

Understory (n)

The shrubs and plants growing beneath the main canopy of a forest.

Malice towards none

First random thought this morning

For past many days, the front page of my news paper starts from page 5 or page 7 and its usually a half page in width.

The notions like Front page, main headline, Page 3 have all lost their meaning. "Discount" is the key operative word these days. I heavily discount whatever people want to "sell" or 'tell" me.

Show me the evidence

These days everyone in India suddenly seem to have become rationalist - a trait not usually associated with us. Everyone is seeking evidence before believing in something! Whereas in recent history, the world has known us as an emotional society driven by utmost (read blind) faith in everything that cannot be explained rationally.

Post independence there have been some famous cases of evidence seeking. But in most such cases the inquisitors were in insignificant minority. For example, someone wanted evidence of Lord Ram having been born in Ayodhya. Some other wanted evidence of the bridge constructed over Indian Ocean by the Lord's army to reach Sri Lanka. Many have been seeking evidence of the death of Neta Ji in plane crash many decades ago. There is a section of people who wants more evidence to believe the official version of the death of Lal Bahadur Shastri and Shayma Prasad Mukherjee; etc.

Nonetheless, most of these pursuit of evidence have been confined to drawing rooms, club tables or court rooms. Rarely did it become a rage. However, in past one decade, evidence seeking has assumed much wider spectrum. In my view, it all started with some people coercing others to provide evidence of their secular, patriotic and nationalistic credentials by chanting Bharat Mata ki Jai, wearing skull cap, not eating beef, not posing for magazine covers in Ram Lila attire, etc.

Given the rich political dividend this pursuit of evidence has yielded in past 5years, its spectrum has naturally expanded. People have asked the PM evidence of his educational qualification. Now people are even asking evidence of military operations!

Unlike many studio experts, I have no issues with Chidambarams, Digvijays, Kejriwals and Nirupams of the world. These people will remain relevant till the time a typical Indian male does not start watching and admiring Kim Kardashian, Sunny Leone, Poonam Pandey et. al. without any hesitation and/or sense of guilt.

Nonetheless, as distracted and exasperated as I am, I would also like to join the army of legendary evidence seekers and ask:

(a) Mr. Arvind Kejriwal - "You say AAP government in Delhi is the only corruption free government - what is the evidence?"

(b) Mr. Sanjay Nirupam - "Your leader Mr. Rahul Gandhi has promised full loan waiver and 50% cut in power tariff to the farmers of UP. Please provide evidence of the sources of funds that he proposes to utilize for fulfilling his promise."

(c) Mr. P. Chidambaram and Mr. Digvijay Singh - "Please provide evidence to the effect that in 10yrs of UPA government Indian Army/RAW never violated the ceasefire at LoC; did not carry out any surgical strike; or supported rebels in Baluchistan as regularly alleged by Pak authorities and media."

(d) Mr. Nana Patekar and Thackeray family - I fully agree all Pakistanis should be declared persona non grata. "Please define who is a Pakistani for the convenience of authorities who will implement this plan."

Wednesday, October 5, 2016

Accommodation is the word

Thought for the day

"The same ambition can destroy or save, and make a patriot as it makes a knave."

— Alexander Pope (English, 1688-1744)

Word for the day

Gale (n)

A very strong wind.

Malice towards none

Heard an IT Commissioner issuing an open challenge - 'Those who have avoided paying 45% will definitely end up paying 60% (30% tax and penalty @100%, i.e., another 30%)!

First random thought this morning

Why Arvind Kejriwal is important to Indian media?

He is obviously the least powerful, and therefore least important, of the 31 chief ministers in the country.

Why is it so that the national media, especially electronics, considers it important and necessary to highlight whatever he says or does?

In Delhi or Mumbai, did you bother to know what Pawan Chamling, Okram Ibobi Singh, Lal Thanhawla or Mukul Sangma have to say on the surgical strikes on Pakistan?

Accommodation is the word

The Monetary Policy Committee of RBI made its first policy statement yesterday. On the basis of an assessment of the current and evolving macroeconomic situation at its meeting today, the Monetary Policy Committee (MPC) decided to reduce the policy repo rate under the liquidity adjustment facility (LAF) by 25 basis points from 6.5 per cent to 6.25 per cent with immediate effect.

Overall the Committee sounded neutral on the macroeconomic and monetary conditions and very accommodative, as it expected the domestic momentum to get somewhat offset by the global slowdown.

The Committee said, "The momentum of growth is expected to quicken with a normal monsoon raising agricultural growth and rural demand, as well as by the stimulus to the urban consumption spending from the pay commission’s award. The accommodative stance of monetary policy and comfortable liquidity conditions should support a revival of credit to the productive sectors. The continuing sluggishness in world trade and smaller terms of trade gains than in the past point, however, to further slackening of external demand going forward. Accordingly, the projection of growth of real gross value added (GVA) for 2016-17 is retained at 7.6 per cent, with risks evenly balanced around it."

In this context it is pertinent to note that the rating agency CRISIL in its latest report has observed material improvement in the credit quality of Indian companies during 1HFY17. As per the rating agency, for the first time in the last 10 semi-annual periods, the number of debt upgrades outnumbered the number of debt downgrades. The ratio for 1HFY17 stood at 1.2 compared with 0.8 2HFY16.

The report highlights that there were 646 upgrades to 553 downgrades in the first half. Upgrades were concentrated in the domestic consumption-linked sectors such as auto ancillaries and packaging, and in the exports-linked pharmaceutical sector. On other hand, downgrades were mainly in the investment-linked sectors such as construction, industrial machinery, real estate and metals. Financial (capital structure, debt protection and liquidity) and business (demand, profitability and working capital cycle) reasons contributed equally to rating actions.

CRISIL forecasts the overall ratio to stay above 1 in the near term led by an expected rural leg-up to private consumption following a near-normal monsoon. However, the agency warns that the debt downgrades in value terms are expected to be more in the second half because of continuing pressure on the investment-linked sectors.

In view of the rating agency the investment cycle is yet to pick up, there hasn't been a material deleveraging in corporate balance sheets, and weak assets continue to mount in banking. The focus therefore has to be on the sustainability of this improvement in credit ratio.

Tuesday, October 4, 2016

Gather amunition before the war begins

Thought for the day

"And, after all, what is a lie? 'Tis but the truth in a masquerade."

— Alexander Pope (English, 1688-1744)

Word for the day

Knave (n)

An unprincipled, untrustworthy, or dishonest person.

Malice towards none

Is our fight with Pakistan or Pakistanis?

And have we already defined who is a Pakistani?

First random thought this morning

I have not heard anyone who seriously believed that the latest Indo-Pak standoff could actually escalate into a full-fledged war.

I am therefore totally unable to explain the losses in financial markets on last Thursday.

I suspect it could either be a case of foul play or something serious taking shape in the womb of time that will be revealed in due course.

Gather amunition before the war begins

As the date for RBI's periodic policy review date draws closer the anticipation regarding the likely move on policy rate is rising. Like most preceding policy reviews, the opinion is divided this time also.

The analysts and economists have been arguing against any decision to cut repo rate in today's MPC meet. However, the bond traders and investors appear convinced of a rate cut.

This dichotomy is not unprecedented. Rather it is very common during periods when the monetary policy is expected to play an aggressive role in the overall macroeconomic conditions. Usually it occurs closer to the peak and troughs of the rate and economic cycles.

More often the traders get it right. However, whenever they are wrong, the losses are huge. Whereas economists and analysts usually have not much to lose, should their expectations not materialize.

Though as usual I would avoid speculating what MPC statement to be released later in the day will read like; in the current instance, I would wish that a 25bps cut in repo rate is done in each of next three MPC meetings, beginning today.

This is nothing to do with the FM, industry or traders urging for a rate cut. I intuitively believe that under the current circumstance it would be the right thing to do. For example, consider the following:

(a) BoJ in its last policy statement has indicated that the current monetary policy direction may have lost its utility and a change would in the order. It is likely that US Fed may hike the key policy rates in next 3-6months, reversing its stance taken since December 2015. Some other key central banks may also be forced to change their current policy stance in 2017.

The immediate impact of such changes on global economy and market is unpredictable, thus higher volatility is likely, especially in the currency market.

Under the circumstances it might be desirable for RBI to create some policy cushion for defending INR and attracting higher flows by raising rates. This cushion is almost absent currently, in my view.

(b) The rate cut today will come at almost no cost as inflation outlook has improved materially; with IDS, disinvestment and spectrum sale the fiscal balance appears supportive of lower rates; economy is far from heated and with real estate market is at bottom no bubble is floating around. To the contrary, a rate cut today will help banks repair their bleeding balance sheets and get prepared for the next credit cycle as well as for any crisis like situation, should the global conditions deteriorate rather precipitately.

(d) The demand outlook is improving with government willing to spend more. Lower rates will have the desired multiplier impact

Monday, October 3, 2016

Nifty: tighten your belt

Thought for the day

"Lulled in the countless chambers of the brain, our thoughts are linked by many a hidden chain; awake but one, and in, what myriads rise!"

— Alexander Pope (English, 1688-1744)

Word for the day

Sublime (adj)

Complete; absolute; utter; supreme or outstanding.

Elevated or lofty in thought, language, etc. e.g., Paradise Lost is sublime poetry.

Malice towards none

Have the surgical strikes in PoK by Indian Army taken the government beyond any criticism?

First random thought this morning

The farmers in the border areas of Punjab have been evacuated by the Indian Army for security reasons. Many of them have the crops standing ready for harvest.

I am sure the State will compensate for them adequately for the financial loss. But the loss of precious food grain will not get compensated.

Nifty: tighten your belt

As pointed out last week, in September the divergence between the MoM change in headline Nifty value and the change in MoM average traded value has widened to the largest since March 2016.

There is enough evidence to suggest that this divergence shall get minimized in the month of October. In simple terms it implies that Nifty shall move in a much larger range this month, mostly trading in the upper half of the range and perhaps settling around or below the average.

Given the present chart patterns and placement of momentum indicators, it appears that after a week of consolidation, we may see a sharp jump higher in Nifty, before it settles down little lower to end the month with decent gains.

At the same time, it is critical to note that the intermediate uptrend from the intraday lows of September (8555.20) could be the last such up move in the larger up move that started from February intraday low (6825.80).

I expect Nifty to record an intraday high between 9370-9410 in this up move that may last anywhere between 3-13 weeks. A 8-10% shall likely follow post the tryst with the new peak.

In short technically expect a 8-10% Nifty up move from the current level followed by a 8-10% correction; all in the next 6months.

Last week, Nifty has defended the 8606-8630 range (on closing basis) despite rise in momentum. This morning there is nothing to suggest that this support base will be broken meaningfully this week also.

Bank Nifty though is looking shaky. As suggested last week, I would continue to avoid banks for any short term trading.