Lehmann Bros. filed for bankruptcy today and the global markets have tumbled. The Indian markets are no exception. The price of crude is now below $ 100, yet our markets have not rallied. The reason for that is the unusually fast depreciation of the Indian Rupee against the US Dollar. The USD has risen from Rs. 40 to Rs. 46 in just a few months. The rise has been very sharp since the day Derivatives trading in Forex was launched in India. So such a sharp move in the USD-Indian Rupee exchange rate was sort of expected on the back of heavy speculation. The rise of the dollar against the rupee has almost nullified the fall in Crude Oil price.
But such bankruptcies in the US financials can actually be good news for the markets, in the sense that all the bad news is finally getting out in the open. Also consider the fact that the bell weather stock of India, Reliance Industries has finally taken a pounding. During the entire bear market phase of 2008, RIL was the last man standing coz it hadn't fallen much as compared to the mid-caps. It was sort of holding the fort above Rs. 2000 levels. But today it has broken down to a low of Rs.1832. To my mind, this is a sure sign that we are finally close to a trend change and the end of the extended bear phase. RIL will soon form its bottom and then usher in a rally for the Diwali-Christmas season. Most of the midcap stocks may have bottomed out already and it makes sense to go out and buy such beaten down value stocks in bulk. I think we are on track for a rally around Diwali which could last upto Christmas. So keep your shopping list ready.