Equity Crash - Connecting the Dots

ashu1234

Well-Known Member
#1
Today's Equity crash is just a beginning of series of systematic pull back of the cheap money fueled by the FIIs. First warning bell rang in May when our currency has started depreciating and for starters(currency most of the time has an inverse co-relation with Equity Index). Divergence was there in the trend coz both Equity and Currency were in upswing. Reason being the USD pulled out of the Indian economy from the debt instruments.
http://www.bloomberg.com/news/2013-...s-to-fall-as-socgen-sees-rout-currencies.html

Domino effect got confirmed by further news here.
http://economictimes.indiatimes.com...58-64-against-dollar/articleshow/20534118.cms

So clearly our market is being propped up by these strong FIIs and the analyst who were boosting on the earning potential ignored or tried to overlook the money which was already invested by the Carry traders. And results are obvious. We took a hit of approximately 3% even Mr Bernanke suggested that they may wind up their QE by the next year. So its a easy guess that our shares and index will go for a toss if in reality that actually happens.

I'll update this thread for further developments as Equity, Currency and Commodities are deeply interconnected and have deep repercussions. Feel free to add your views and comments.

Some more links are already posted in this thread http://www.traderji.com/metals/87727-gold-import-duty-hiked.html#post817882

So is our market really worth Investing from here in shares whose value is dependent upon the mercy of borrowed money.
How you consider risk of FIIs money into our system. Do we have any shield to this Systematic risk.

Waiting to hear from you....
 
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jagankris

Well-Known Member
#2
Ashu,

Also pls elaborate the Metals - USD INR correlation.
Currently Gold is bearish in the international markets but because of the weak INR Gold is still trading high in MCX.

So traders who are long gold here are actually long in USD - INR Than gold ???

TIA.
 
#3
Till last month, the FIIs were pumping in the money and the dollar was at 55-56 level. Even if they purchased equities at 5500-5600 and dollar at Rs. 55 level, they have made at least 10-15% due to currency depreciation effect. Whatever the amount of rupees they have taken out of the market, I'm sure that in dollar terms it is less than the dollars they pumped in.
 

ashu1234

Well-Known Member
#4
Ashu,

Also pls elaborate the Metals - USD INR correlation.
Currently Gold is bearish in the international markets but because of the weak INR Gold is still trading high in MCX.

So traders who are long gold here are actually long in USD - INR Than gold ???

TIA.
Hi,
Ideally its more of Gold-USD/INR inverse co-relation. And it started as far as I can recall when INR was @ 47. You are right to point out that Traders who are long at MCX are actually long in USDINR.
It is observed that whenever there is a big fall in gold(in dollar terms), our currency depreciates and negates this effect and vice-versa. Co-relation is around 80-90%. A lot of arbitraging trading can also be the cause where short position is taken in gold(comex), and long in mcx and currency of equivalent value.
 

ashu1234

Well-Known Member
#5
Till last month, the FIIs were pumping in the money and the dollar was at 55-56 level. Even if they purchased equities at 5500-5600 and dollar at Rs. 55 level, they have made at least 10-15% due to currency depreciation effect. Whatever the amount of rupees they have taken out of the market, I'm sure that in dollar terms it is less than the dollars they pumped in.
please elaborate.
 
#7
I think the rupee will start to strengthen now, on within a couple of days. Price wise, the rupee may not weaken much. I created a short position in USDINR today.
Brave fellow !!
 

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