India at Crossroads - 3

This will most likely be the concluding post on India and World Economic fundamentals for the time being from my side. I am eager to get back to trading posts and our technical tutorials and I hope you too are looking forward to the same.

Well, as I said in last post that I have a project deadline this month and have been working weekends too; but couldn't resist this post since next week is so important on so many counts. And most important day of this coming week is not Monday... it is Sunday for a change. Today (it is already Sunday) we will have voting in the Greek Election. As you would recall, last election resulted in no clear majority with Radical Left parties scoring high. All their attempts to form a Government in May failed and hence another election. Already Europe and rest of the World is watching with held nerves as to what will happen in Greece. Powers that be in Europe and across the World would have already tried all tricks to secure win for Parties they prefer.

These Elections will close for voting at 5:00 pm Athens time with Exit Polls following immediately. Initial estimates of the results will follow in couple of hours and clear picture will emerge before midnight in Athens. Various polls have shown increased support for Left parties but stakes in this Election for entire World are too high and 14 days old polls (as per rules in Greece, all polls have to be before 14 days before poll date) can not be relied upon. This one single event will decide the course the World markets and economies will take in the short to medium term. Central banks from Frankfurt to London, Tokyo to Beijing are all on the edge awaiting what Greece is thinking and for good reason.

Then off course we have RBI meeting on 18th. Indian markets have already factored in 25 basis point rate cut amid contradicting statements from RBI and Finance Ministry officials. A higher rate cut will rejoice market but if RBI gives in to the threat of adamant inflation and does not cut rates we may see some sharp correction. Some cut in CRR will anyway happen me thinks. But to be honest, India does not look very good as a developing economy and the condition here looks more and more like stagflation (need to do a post on that perhaps).

Then there is another issue of Presidential Election in India on 19th (July) with results coming in on 22nd. I really wish, Congress should have shown this fighting attitude against Didi during FDI in retail debate. We would have been in far better situation today. But Pranab Da getting out of Finance Ministry is also a huge positive for India. Though I like him intellectually, he has failed miserably as FM. Almost every parameter measuring Economy is worse than the time when he took over. I really wish that he wins for the simple reason that we get a new FM. C Rangarajan would be my choice but I can settle for Manmohan Singh too.

These events will have a bearing on Markets in next week and volatility may remain high. It is usually a good time to make money by using Strangles or Straddles. Personally I am not in a position to take a call as to which is the likely direction for the markets. Last month and a half has been crazy so no shame in admitting that I am a trader who does not have any opinion on the market. In such situation I will do what I do best. I will look at the charts and see if they tell me something.

Hang on, I may post another one in half an hour. Its been long since I posted some charts.