Indian Stock Market Headed For A Crash!!

#1
The signs are ominous. Housing collapse goes unabated. Credit cruch continues to plague the market. Stifling regulation and reform is in process. This is going to cause major upheaval in the financial sector, causing the derivatives time bomb to explode.

Let me try to explain some of the major factors that are impacting the market in a big, big way. There is no quick solution and turnaround to this problem:

- Bond reinsurers (MBIA, AMBAC) were downgraded last week. This will cause further writedowns in financial stocks (citi, fifth third,etc). Over the next few months, several banks might be forced to close down.

- Retailing has begun to slide and this quarterly earnings will start showing the cracks. Surprising, today JC Penny was upgraded today by Deutsche bank..THIS IS JUST A SHAM TO DUPE POOR SAP RETAIL INVESTORS!!

- Emerging markets are sliding. Technically, India is extremely vulnerable. If you are an investor in India, be mentally prepared to lose another 10% in one day! I can see a 1000-point drop in one day coming in the next few weeks. Chiddu will shut down the exchange and RBI will intervene in earnest. Yet, it won't help. Inflation is out of control, the government is in chaos, RBI is sabre-rattling about raising repo rate...the situation is ripe for a stock market (or a Rupee devaluation) in India. Don't get caught in this mob frenzy.

- US planning to attack Iran..Israel causing problems with Lebanon. The global political situation is getting tense, causing oil to remain at elevated levels; which in turn, will aggrevate the stock market problems.

- US city, state and federal organizations are in dire straits. Do not overestimate their abilities in intervening and protecting the small retail investor.

Protect your own wealth. Don't try to wander on the beach when is tsunami is headed your way. Even if the stock market doesnt crash, it is highly, highly unlikely that you will get returns higher than a bank CD. So why take all this risk for no reason?

The fall in the market can be directly attributed to tight monetary conditions. There are three entities that spend - consumers, corporations and government. Right now, all three entities are clamping down on spending. High repo rates are clamping down on consumer spending on discretionary items (real estate, autos, etc) and spending more on essentials (food, oil, EMI payments, etc). Corporations are clamping down (slowing FDI flows, high oil prices, salaries) because borrowing costs have increased dramatically and equity markets are stalling. Government is clamping down on spending because it could trigger a balance-of-payment crisis. All in all, there doesnt seem to be a ray of hope - other than unalloyed speculation from a naive investor.

Real estate stocks are the canary in the coal mine. Look at Indiabulls Real Estate Index and you will see where the market is headed in the not-too-distant future!
 
C

CreditViolet

Guest
#2
Isnt it quite late in the day warning of market crashes? I mean market has only been down a few thousand points in a few months so the prognosis might be a tad bit early.
 
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dhakkan

Active Member
#4
Hi.. it seems was reading some analyst ... saying both ...it will crash and then it will not carsh....

Protect your own wealth. Don't try to wander on the beach when is tsunami is headed your way. Even if the stock market doesnt crash, it is highly, highly unlikely that you will get returns higher than a bank CD. So why take all this risk for no reason?
Do you have any target and projection....because this news items put togather...does make it a good case...but you might have read ...

"When you can measure what you are speaking about, and express it in numbers, you know something about it; but when you cannot measure it, when you cannot express it in numbers, your knowledge is of a meagre and unsatisfactory kind." - Lord Kelvin.
 
#5
Hi.. it seems was reading some analyst ... saying both ...it will crash and then it will not carsh....



Do you have any target and projection....because this news items put togather...does make it a good case...but you might have read ...

"When you can measure what you are speaking about, and express it in numbers, you know something about it; but when you cannot measure it, when you cannot express it in numbers, your knowledge is of a meagre and unsatisfactory kind." - Lord Kelvin.

I agree with your need for numbers.

I project BSE < 10,000 by end of 2008. However, it is really difficult to measure in nominal term, because it stock market projection depends on INR/USD parity, inflation rate (meaning RBI M3 money supply), and other factors.

Measured in USD terms (or better yet, when measured in 10 grams of gold), BSE will crash by atleast 30%.

Why do I say - when measured in gold? Because GOLD IS REAL MONEY...probably our ancestors were better aware of that fact than us.

Historically, 1 BSE was always 5-10% below the price of 10 grams of Gold. Although nominally, BSE seems to have had 'magnificent growth', when measured in GOLD terms, 1 BSE still trades around 10 grams of Gold.

Given our current economic conditions, poor fiscal and monetary policies, and complete cluelessness of the retail investor, I think a 30% drop in stock prices would be an optimistic estimate.

If US plunges into a deep recession (which it will) and commodity prices continue to skyrocket (which they will), India will sink into a chaos. At any rate, it is too late in the game...any 'fix' would be akin to putting band-aid on a bullet wound.

A realistic estimate would be 1 BSE trading at 0.5 times 10 grams of Gold....which means either Gold prices shoot up or BSE falls dramatically. Thats the trade I will bet on.
 
#6
Btw...I posted this article on my personal blog two weeks ago...I have been tracking the subprime crisis and the Indian oil bonds issues for year now and have 'datestamped' logs about my 'predictions'. I also post monthly investment outlooks for anybody that is interested...

However, enough about me. I just wanted to introduce myself and let you know that I have been an active trader for a while and passionate about macroeconomics.
 
#7
the technical picture of the market seems quite different,,in my humble opinion the mahamantra.."market discounts the future"" seems tobe working perfactly at present..market knew in advance that the fundamentals will worsen and so it started coming down from WHEN ..the picture was very rosy..now... at a time when the picture seems tobe dirty...markets are at some very very strong supports..so in my opinion ,i mean i am very very clear in saying that we have either hit a bottom or are about to...2-3 % downfall in gdp = 8000+ sensex points..its as simple as that....and is the india story over in six moths ?? i heard the india story is 30 years long!!!!!!!!!!
 
#9
During last December and January everything is fine, the great Indian Growth story, The US is coming out of recession grip etc. etc. Everyone know then that sensex will reach 25000, 40000 etc. ... And by late January markets fell drastically, and then there is no signs of any economic trouble. Many new and old investors looted the market as they all know it was the last chance to buy before sensex hitting 25000. Ha, What Happened ?

The real cause of the fall is apparent now. Simply the markets knew what happened today many months back.

Are we at extreme negative sentiment now ?. If so, then a bottom may be formed soon.
 

dhakkan

Active Member
#10
I dont pretend to be and expert as I am not.. but agree.. with this extreme negative sentiment...I too feel the same.
Looks like a bottom in nearby .. or even gone past.