Forget Fed... its all happening in India

Friday evening, Government of India made some bold announcements. There was nothing new or radical but these announcements came at a totally unexpected time and pace. Following up the Diesel hike and subsidized LPG cap, GoI cleared FDI in Retail, Aviation and Cable. Government also cleared divestment in four companies. PM statement that, 'If we have to go down, we will go down fighting' makes one think that GoI may be serious this time in pushing these steps through. Mamata tried (as usual) to play the spoil-sport by giving 72 hour ultimatum for rollback which will be ending tomorrow evening. There will be a meeting of TMC on Tuesday to decide further course of action. Been tweeting about it and I hope you guys are reading those tweets on the blog.

But focusing on the positive part as of now; what these announcements did is more than the symbolic value of their benefits (which is huge). Suddenly there is a sense of hope and a sense of purpose or direction within the UPA Government. These moves may well serve two big purpose in the immediate term. First, it may just save us from the shame of becoming the first BRIC economy to loose investment grade rating. Now this again may or may not be a big deal for India but it would have badly affected the already in trouble Private Sector. Maintenance of the rating will help Indian companies to keep cost of overseas borrowing in check (though it is already bad due to change in INR/$ equation)

Secondly, it may just give RBI some room on Monday to start thinking about cutting rates. There is more than just whispers by Pundits that RBI may continue what GoI has started. There is widespread belief that RBI may join the party and cut the rates today. If you remember the last policy statement by RBI it was clear that RBI wanted some policy actions from Government before any rate cuts. Though the Inflation (around 7.55%) is hardly anywhere near the comfort zone of RBI but slippage in growth may just prompt them to take some risk,

Till Friday, I was thinking that 'QE Unlimited' would be a big thing but all these developments have pushed it in the background at least for India. Make no bones that QE3 will have far reaching and good/bad consequences not only for India but for the entire World in the long run but in the immediate term, I think events unfolding back home will have a much larger impact on NIFTY. I did not want to post any chart as there is hardly any change from when I last posted one but still here it is. Looking better and better.

I have given some Fibonacci levels for the correction from 6300+ levels to around 4500 level on NIFTY. We have 61.8% of this fall (which is pretty important) at around 5650 and we are about 75 points from that level. I am very much sure that this level is pretty much in sight and reach.

However, I think the Euphoria on QE3 as well as all these positive steps will take Markets up to a level which may be more than it deserves. Also we have seen some pretty impressive moves and profit taking is due and also as a consequence of rubber band effect, I expect correction in second half of the week (it may happen as early as Tuesday). I probably (if I get time) will take a contrarian view and open a small PUT position for NIFTY tomorrow at around 5645-5650 with strict stop loss of 30-40 points. Beware, sometimes I trade only on hunch.

I am back in Pune just today and was catching up on many things hence cannot write more. Have to take your leave as another week starts now and have to prepare for it. This will be a wonderful week with Ganeshotsav starting on Wednesday. I pray and hope that Lord Ganesh will bring best of health, wealth, wisdom, peace and prosperity in the lives of all readers. Happy Trading.