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Opinion

The Big Bang

…has happened? The Sensex crashed over 400 points after coming close to the elusive 18,000. Today’s cause for concern is political instability.

As I’ve said earlier, I believe the fall of this government is actually good for the stock markets. This will remove the Left from the government, and the Left is necessarily bad for stock markets.

Secondly, this will not slow down anything – no government policy not already in force is now an absolute necessity – if anything, they are hurting companies by introducing all sorts of ridiculous measures. For instance it is fiscal imprudence to try to curtail the rupee, and for that the government is willing to borrow 200,000 crore from the markets. That is higher than any other debt the country has today and we want to increase it for some stupid reason like keeping exports competitive – instead, isn’t it better for us to have a weaker dollar so we can acquire overseas? So we can get cheaper imports like computer parts, power equipment etc. which will make us develop faster? But the government is like an ostrich with its head in the sand; and if this government falls, it will only be a good thing.

Of course, markets will be irrational – there is likely to be a big fall when the government finally collapses. But that will be stupid because everyone knows and has expected this for a while.

The only conclusion from that is that the market is looking for a reason to fall. Not that the market has a life of its own – it does not, it’s just a sum total of sentiment – but the overall sentiment seems to be like this: I will sell at the first sign of weakness.

Yet, foreign investors are buying. They bought 1400+ cr. on Monday which is about 400 million dollars, a fairly large sum for buying in a day here.

What will I do? I think this is a temporary blip so I’m staying long. Of course I may flip anytime, because things change too suddenly in the market. Don’t go by rumours right now. I’ve exited almost all my small and mid cap positions that retreated to my stop losses, and I have positions in the Nifty and RIL. (Still holding Kamat Hotels, Suzlon Energy and a new entry, Sintex). Have exited Bartronics, NIIT Tech, Marksans Pharma etc.

Let’s see how this week pans out. It will be interesting to see if there is a really large fall, as the first round of results (Infosys) comes in on Thursday and there’s a Reliance board meeting on Friday. Very very interesting week.

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