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Friday, July 4, 2008

Analyze this!

India's economic miracle is certainly not over, it's just started. The complete turnaround in the Stock Market from the euphoria of 21000 to the present gloom of 13000 is the handiwork of a newly bred species called Hedge Funds. These people move fast. Quick money is their mantra. The Futures market is their play area. If I was a Hedge Fund Manager with unlimited resources at my command (resources include huge amounts of money, control over the print and electronic media, financial analysts and politicians across the globe on my pay-roll etc.), this is what I would have done.

Starting at the start of Financial Year 2007-2008, first I would have pumped in money in the emerging stock markets, with a view of cashing out within six-nine months. So after creating a frenzy for stocks in Nov-Dec, 2007 and building up a Crescendo, I cash out at the peak in early January, 2008. But since markets don't fall on their own, I have to orchestrate a fall. I do that by shorting the Nifty in huge quantities. The other smaller players have no choice but to follow suit. It's like playing poker......have you ever played poker? :) The guy with the most chips pretty much decides what happens at the table. Ok, back to the market. So now that I've shorted the Nifty, how do I convince other people to sell their stocks too, so that I can make profits on my shorts? I start circulating pessimistic stories in the media about an ensuing recession. But since just two-three months ago, my people had circulated bullish stories in the media......how do I now do a volte-face? So, my propaganda has to be backed by some change in the fundamentals. And how do I change the fundamentals of any economy? I fiddle with the price of oil, which is the most important factor in any country's economy, specially the emerging markets. So, having made my money in the stock markets, I now start pulling out all my money from there and start buying Crude Oil Futures. So, as I push Crude Oil prices up by my relentless buying, the rising prices of oil play havoc with the economies of most countries and their stock markets come crashing down!

So this was what happened until now. What happens next? Surely, from a price of just $55 two and a half years ago to almost touching $150 now, the actual demand for oil has not tripled in this short span of time. The prices went up due to huge Speculation in the Futures market. So, when prices reach unrealistic levels, they become unsustainable. To my mind, that point would be reached somewhere around $171 levels and and the price of Crude would then crash back to around $110-115 levels. Correspondingly, a surge in the stock markets will then be seen. I think this turning point would be reached some time before the end of July, 2008, which is this month itself or latest by August. So, my guess is that from August onwards, the stock markets would again start going up.

I am actually praying for an early election. An early election would mean that the politicians who have amassed huge wealth in the last four years of power will open their purse strings and start to SPEND. All political parties will start to SPEND their money for electioneering, which will generate lot of employment and business across the country.

Contrary to popular belief that the fall of the UPA Govt. will bring instability and uncertainty, my reading is that a fall of the govt. will actually END the instability and uncertainty which is currently prevailing in the country and specially the stock markets.

Cheers!

11 comments:

BIPIN said...

Dear supestar,
Thanks for the eye opener informations ... can you 2-3 good scrips whose CMP is very cheap takin a/c their fundamental,P.E FOR ATIME FRAME OF 6-9 months..
BIPIN

sandy said...

Games People Play!.... Nicely put and you made your point

Hope to see stable market conditions in two months.

Nagendra said...

Hi Super*,

It was really a great article by on the current Indian economical and Stock Market trend. Well as you said the oil price may go up to 171$ and come back consolidating to 110$, what will happen to all the oil companies stock prices, are they going crash down along with its price as we have also seen that though oil prices have gone up the oil company stock price have not gone up parallelly, please give your comments on this.

Further what is opinio about the steel sector I was planning to invest in Sesa Goa and SAIL, please give your inputs on these stocks.

Thanks & Regards,
Nagendra.

Nagendra said...

Hi Super*,

It was really a great article by on the current Indian economical and Stock Market trend. Well as you said the oil price may go up to 171$ and come back consolidating to 110$, what will happen to all the oil companies stock prices, are they going crash down along with its price as we have also seen that though oil prices have gone up the oil company stock price have not gone up parallelly, please give your comments on this.

Further what is opinio about the steel sector I was planning to invest in Sesa Goa and SAIL, please give your inputs on these stocks.

Thanks & Regards,
Nagendra.

ravindra said...

Hi,

All analyst in TV and magazine are telling market will go to 10k level.Should we wait for that level to start buying.What's your opinion on this.

Thanks
Ravindra

Ragu said...

Dear Superstar,

What is your view on RPL? I am holding 1000 stocks at an average price of 140. Will it be good for long term?

-Ragu

Ashish said...

Hi Superstar,

I came across one multibagger stock "Tide water oil" with very less volume but still lots of activity happening on this counter. Can you throw some light on your findings on this counter?

There was some news about the stake sale on 18Jun in leading newspaper abt this stock. The thing I'm unable to understand is whether the disinvestment process has started or not, bcoz this stock is making some spikes in price movement. Fundamentals are strong, and the next movement is information/message driven. Either ways it can go for circuit in coming days. Hope you might have come across this stock.

Rgds,
AKS

hardikpndy said...

Hi Superstar,

Your views on current market scenario is much awaited especially now.

Meanwhile I keep visitng your # http://superstarastro.blogspot.com. But I think you stopped updating it. I need to tell you one thing. You must be knowing Ashok Motiani, an indian market astrologer. He predicts the market based on the stars and planatory projections. Current market levels were exactly predicted by him 2-3 months back. Now he has made his services paid.

As you too believe in astrology. Can you give it a try to see what is there in future for markets?

You may feel this as vague as you are a pure fundamentalist, but just try once.

Cheers!
Hardik

Superstar said...

Hi Hardik,
My reading about the current situation in the market is, as I recently wrote in my blog also, that we are going to bottom out within this month itself or latest by early next month. I see the market going in a medium term BULL PHASE very soon. Astrologically, Mars is going to leave Saturn alone on August 10, which also augers well for the market.

The political scenario is going to become clear with tomorrow's Confidence Vote. Whether the UPA stays or goes, the uncertainty of the political situation in the country will be over. Even if the govt. is not able to garner the required votes, the markets are going to go up in the medium term after an initial knee-jerk reaction.

It will be prudent to Buy good quality and good Value stocks now to make very decent gains in the medium term.

Cheers!

ravindra said...

Hi superstar,

Can you share your views on

rishi laser
Electrosteel castings
virinchi
Orbit Corporation Ltd.

Thanks
Ravindra

MANOJ said...

Dear Superstar,

I have 13000 cybermate @ Rs.10/-. Could I book loss & enter into Gremach Infrastructure.

Please guide.

Regards,

Manoj