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Commentary

This Week's Random Conspiracy Theory

…is that the RBI will not let the dollar devalue against the rupee, regardless of inflation figures, until May 22.

Because that’s the day the Karnataka elections are over. Karnataka has a lot of exports – not just IT, which is what makes it famous, but also textiles, granite, lots of different types of ore etc. A dropping dollar will threaten all these people’s jobs, and something done today may adversely impact elections, no?

At least it will ensure that the Congress stays out of power. And that is a no-no. The problem is what to do when prices of food items are so high? I think that will require a lot of scratching of heads, but I don’t think there’s any solution except to let the dollar go, eventually. The FM routinely gives excuses about how they will stabilize, but they will not, as long as we have this ridiculous dollar-rupee equation.

Of course, my theory goes further. Not only will the dollar slide after the 22nd of May, it will do so without warning from the RBI or anyone else. The reason will be some international reason like too much money coming in, or that our markets are buoyant (which they will be). Warning means too much explanation and too many people trying to do stupid things like speculating on derivatives which they don’t understand. But this isn’t just no-warning. This is actually going to be saying “we’ll protect the dollar at any cost” and not doing so, stating reasons for the lack of protection as something else. The CNBC commentators will be having wet dreams about this kind of day.

That’s also the reason why there should not be a stock market crash before then. But Karnataka is not so stock-market-dependant so that cannot be inferred…still, a party does not want any negative news during elections, and the Congress will do whatever it can.

That’s me getting off the political pedestal, and going back to reality. Please note that this is a random conspiracy theory, and should not be taken seriously, but it does refer to people dead or alive. It’s just me having some fun.

  • Arpan Sen says:

    >Hi Deepak, Arpan here. This is the 2nd time in 2 consecutive posts you mention our markets would be buoyant in May or may be I am missing something here. How do you justify the current market levels given the rising inflation, chaotic US economy, high crude, India slowdown and what have you. And frankly this is not the only blog in which I sense bullishness — quite a few of the money managers who predicted doomsday is tomorrow are also bullish and predicting market levels of 19k. I am confused here, why don’t you help?

    Regards,
    Confused Soul

  • Deepak Shenoy says:

    >arpan: There are no fundamentals at act here. remember that you can trust only one thing – price. Technicals seem to denote the move upwards. I don’t know how much but I can tell you that if the index goes down from here too many people stand to make money.

    Now I belive this is a bear market rally, a pretty sharp one. So we will go down, likely to below 4000 levels, in the coming months.

    But when the ultra-short-term trend is up,no point standing in the way. Let it go find it’s peak, and then it will come down.

  • Anonymous says:

    >Deepak – Your calls have come good, more often than not. below 4000,,hmm..that looks scary but entirely feasible.
    Can you share your thoughts in little more depth on the direction of market ? When do you think, we will go down – you mean, the market will climb to 5500 and then tank or tank after 21st May or what ?
    – I also remember your eye opening piece on RIL-RPL numbers, several months ago. With RPL almost set for production, down the year, what is your call ?
    – In the meanwhile, Mudra seems to be taking a wing up. It is up 5% today and as usual, a good call. I did not make use of your call (may be, I will throw in everything which I have, when your below 4000 call becomes reality..letting imagination run riot..may be I can pick 20-15k of Mudra @ 22 or so and then, it goes to the 75, you talked about..)

  • Deepak Shenoy says:

    >Anon: thanks mate. Some of it should be discounted as a bull market move.

    Yes, Mudra’s been doing well. I don’t know why, because it’s not supposed to go up so fast 🙂 It was a long term story and it’s becoming a trading move literally – two months, and nearly 40%!

    Direction wise: I don’t like to predict, but it looks like it’s going up…probably further up than 5500, because that’s the level everyone is looking at, so it will either cross that or turn around before it. Today’s data will show some more and it looks like a lot of people are betting on it going up in May, so it may actually happen only in June.

    RPL: with around 10% increase in refining margins from my post I have a target of 220-230. (IN fact I sold most of my holding at 220+) But that’s a 2009 figure, so I don’t find the stock really attractive today, when there are a number of more attractive stories.

    Still, have been making some money on RPL call options since the 180 levels (those are trading calls, have nothing to do with longer term fundamentals)

    Overall I think this is a market poised to move. It’s looking at a very secular move and wiping out stray speculators left and right. So do not bet a lot of money on any one trade – keep risks to less than 2% of your portfolio and you should do well. There is an uptrend building, and that pattern is getting better and better every day.

  • Rajiv says:

    >Todays close was supposed to be key and it broke 5000 levels. Looks like March lows can be seen in May. I have so far seen the market only going up(been watching the market for only last 2yrs). So I should say this period offers me lotta learning. But as far as a trader is concerned, bullish or bearish outlook doesnt make a diff, one can always make money whichever way the market moves. This market is only headache for investors.