Hi!
As anticipated, the spot Nifty has moved up, and has now re-entered the downward sloping channel formed by the two black dotted lines. The chart of the spot Nifty at the close of Fri 9th Dec 2016 shows that on Wed 7th Dec 2016, the candle did reach the lower black dotted line of the channel, from where it got rebound and went downwards. Many people had anticipated that the spot Nifty shall now fall further to the level of around 7900, which was not to happen. That day’s trading session was in fact a trap. The Rupee was getting strengthened all along, and fall in the market was a contrary activity.
Now, one will find many people taking about a strong resistance around 8300 levels, but will not specify about the resistances. If you see carefully, then the Green coloured 200 DMA line is currently around 8290 levels, is a major resistance. As the spot Nifty moves upwards that this 200 DMA line shall also move upwards. It is a strong possibility, that the spot Nifty may rebound from this level once, but would successfully cross that level in subsequent efforts.
The current breaking news is that the Retired Air Chief Marshal S P Tyagi has been arrested by the CBI for his involvement in the “Augusta” helicopter scam. CBI would not dare to arrest such a high level personality, unless they do have a strong evidence to stake their claim. Needless to say, that this shall lead not only to the arrests of some bureaucrats, but also raise a doubt about the Defence Minister, Finance Minister, and above all, the Prime Minister, who was in the office when this scam took place. The Italian court appears to have clearly indicated the involvement of Indian middlemen for kickbacks, which was before the current government took over, and the previous government had not taken action on that comment from the Italian court.
We may not be interested in going into the details of the politics at any level, but such happenings do have a strong effect on the stock markets. Therefore, it is possible, that on the next trading session that the markets may come down to some extent to take support from the lower dotted black line, and then move upwards. If that happens, it shall be a good opportunity then to go long.
Now my general comments about the demonetization.
It was NOT done to eradicate the black money but was done to get rid of the fake currency notes that were provided by Pakistan and were used for anti-national activities. Black money is not only the large amount of cash stored by political leaders, Bureaucrats, Businessmen or Jewelers. We all have something to do with it.
Let us say that a person has two children and he had bought two apartments for each of them. He took almost 100% loan (partially from his PF etc), and paid the EMI for years till both the apartments were owned by him. Later, both his children get married and settle in some foreign country, when he decides to sell one of the apartment. He receives the amounts in 60:40 ratio, and the cash received by him is actually the Black money created for which the applicable taxes were not paid. The person uses the cash for booking his air tickets, filling Petrol in vehicle, paying his phone, electricity, grocery bills and also restaurant bills for eating out, without realizing that he is using his black money for this purpose.
When one has to make all transactions through bank that such incidences may get reduced considerably. I have seen that people making all their payments through net banking and with plastic money till 8th Dec 2016, but had stood in the line for withdrawing cash from ATM. That is a mental insecurity created due to irresponsible comments from the opposition parties.
RBI knows the exact quantity of notes being printed and circulated. But when fake notes get introduced and increase the cash circulation, RBI’s planning may get screwed up. Let us say, that RBI has some idea about the money they have printed and brought into circulation along with the actual cash being circulated. Just for explaining things, I shall assume that in reality, only 40% of the total cash being circulated was provided by RBI. Balance all was made of fake notes.
In that case, RBI shall never try to replace 100% of the cash being withdrawn in the denominations of Rs 500 & Rs 1000. Ideally, they shall try only to introduce 40% of the cash being circulated earlier, (the cash that was printed by RBI). But 40% is only an assumption. What if it is, say, 32% only? Then RBI shall be introducing 8% excess cash in the system, which may again give rise to black money.
The exact percentage shall only be known on the last day, that is, 30th Dec 2016.
Ideally, it would be proper for RBI to introduce only, say, 25% of the total cash, and wait for the last day. To get the exact figures for cash that was circulated earlier, as against the notes printed by RBI. In that case, If that percentage is, say 35%, and RBI has introduced only 25% of the new notes so far, then on 31st Dec 2016, RBI shall release all the balance 10% of the currency notes, so, from 1st Jan 2017 onwards, there is no problem for anyone. RBI may be sitting on the printed notes for the required quantities, but in a way, is forced to create a temporary cash crunch to get hold on the situation for once in and for all.
I wonder that if I can understand this, why the political leaders, who have been handling these portfolios for the country for years, cannot understand it? Answer is simple. They do NOT want to understand it, for some special reason known only to them. We can only guess that reason.
Tyagi is only a beginning. Just watch the kind of Big Fishes that get caught along with the proof. And yet, these Big Fishes shall continue misleading their followers, claiming that they are innocent and are being framed…. even if they get convicted in the court and are imprisoned.
Mera Bharat is now really getting Mahan.
All my comments are based on my understanding of the situation and I could be wrong.
Cheers!
SS
