Target Sensex

In my September 13 2011 blog, Sensex  bottom target : The UPA gap I had written that the Sensex will bottom between 12000 to 13000.
I had also draw parallels between the Great Depression of the 40"s  and the present recession.


But instead from a low of 15175 on 20th December the Sensex went to 18428 ( Feb 21) in a span of 2 months ( Jan and Feb.) A return of 20/50% in most A group stocks.

What Happened?

A. Post Lehman collapse in 2008 ( corresponding to 1938) the Liquidity gush provided by QE1 and QE2 sparked the Equity + Commodity + Bullion rally. ( Dollar carry trade)
Waning of the effects of QE lead to the declines in 2011 ( corresponding to 1940)


B. LTRO ( Long term refinancing operations of the ECB):
First round of 500 Billion Euros in Dec /Jan
and Second round due on Feb 29 expected to be again of 500 Billion Euros.
The Euro carry trade now, leads to Global equity + Crude  rally. This will lead to a peak  ( corresponding to the peak between 1940 /41.)

From now the rally in the Indian markets will not be that rapid because of continued supply of Paper from:
1. Govt: PSU divestment (ONGC, BHEL, etc.)
2. Banks / Long only FIIS/ Pension funds: Citi-- HDFC   


When will the rally end:
1. When the effects of LTRO weans / No new LTRO
2. Another global crisis ( Iran / Euro zone/Default of CDS (credit default swap) / ?/?)
3. Face book IPO ( Global, Reliance Power IPO)
4. Post US presidential elections ( 44 countries globally have Elections this year including US, France, China, South
Africa)

 The present rally is a  Bull trap.  No new sectors will participate only old  fancied Infra / cap Goods / will run. 

Bottom of the current rally  should come any time between August to November 2012.

The rally will not / may just ( Double top) surpass the prior Sensex top of 21000

the bottom will be the old target between 12000 to 13000

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