Nifty Outlook

Nifty Outlook (Test Video)

Happy Trading!

Festival of Democracy

The biggest festival of democracy has just begun with more than 840 million people exercising their franchise of which around 100 million are first time voters. This Indian Parliamentary Election 2014 is indeed the much discussed, debated and eagerly awaited. Not just by Indians, but by people across the world, for the simple reason that it liberates a billion-plus people. 

What is freedom? As per Oxford Dictionary, it is "The power or right to act, speak, or think as one wants". Freedom means different things to different people. A freedom to a child will be completely different from a freedom of a teenager.  But, what could be the biggest freedom than the "Political Freedom" and when the world's largest democracy goes to polls, it is a show of strength of this political liberation that democracy brings in. It is the time to rejoice, time for celebration. But, remember with freedom comes the responsibility. Responsibility towards the society, towards larger cause.

In Freedom 2014, these 840 million votes are invaluable and if cast responsibly can bring in the much needed change that will act as a catalyst in unleashing the real strength of India. The India that we wish to see for ourselves, and leave behind for our future generations. 

Leaders like Mahatma Gandhi have thought us how one can leverage this freedom as a catalyst for the larger cause. It's time to act. Let's bring the change. 

Vote for India!

Year 2014: Stress Test For Gold

After 12 years in succession of a rising gold price, 2013 ended as an unforgettable year for the yellow metal. The investment case for gold largely depends on whether the global central banks achieve a successful exit from the easy monetary policy. If successful, then bears have a party, if not,  2013 sell off is a massive buying opportunity. 

Some argue that gold price is discounting the falling inflation in the US, paving way for higher real rates - the current US 10-year bond yield offers a real rate of 1.7%. This argument is flawed as rising real rates is a reason to buy gold, not sell it. After pumping in trillions of dollar into system, the Fed has not yet achieved its inflation target and any sign of deflation would ring alarm bells, encouraging them to inject further more trillion dollars into the system. And, if at all there is a rise in inflation, it wont stop at a targeted 2.5% given the massive liquidity infusion over these years. And, if history is of any guide, it is hard to believe that there will be any successful exit from quantitative easing. 

MarketsMayhem thus favors a structurally bullish view on gold. With a non stop rise in Dow Jones Index, clearly American equities are over heated and in euphoric phase. Short Equities, Long Gold could be the theme for this year.

Wishing You a Very Happy & Prosperous New Year 2014!

Is this the start of a Mega Bull Run?

As with any asset class, there are two views. And, that makes the market. This is no different in gold this time and probably first time in the Indian space the general public are largely bearish. On the flip side, smart money is fast accumulating gold at every possible levels. Interestingly even if you assume both the views to be correct, one can still make money. How? No financial instruments or asset goes up or down in a straight line and given the beaten down gold prices, a meaningful bounce is imminent and irrespective of whether you are a bull or bear, you got to be long if you want to make some meaningful money in the near term.

In a zero sum game of finance, it is the time that will be the ultimate Judge. Nevertheless, I present here a confluence of factors that substantiate the smart money flow into the metal. Expectedly the news from the US are very supportive.  While all eyes were on the Fed for the tapering during the last meeting, it turns out to be a sort of anti-climax as tapering was postponed to some unknown future date. Now that the first chairwoman takes over as the Feb chief, we are entering an interesting phase in the history of mankind and quoting Marc Faber, “Yellen to make Bernanke look like a Hawk”, exiting tapering is not a solution for US and for many other central bankers that followed the Uncle Sam footsteps. So, will it or not? If yes, when? It is like Abhimanu Chakrayug, one can easily enter, but few know how to exit. Talks are that the possible first Fed rate hike can be considered only in 2016. That is a long time from now isn't?

Gold tested $1900 during the last debt ceiling issue when S&P downgraded US in 2011. With the debt ceiling now postponed to mid of January, any meaningful resolution is not visible. Will it be the repeat of 2011? No one knows, but is definitely positive for the metal in a seasonally strong fourth quarter which normally peaks around Jan-Feb. Gold bulls cannot ask for anything more, isn't? The pattern that is unfolding during the last few years increasingly now seems to be nearing an end or rather ended on how one looks at it. In either case, it’s time for you to bet on the metal. The sentiment today is largely bearish - both internationally and domestically - and for a gold feverish nation like India, this is something unusual. Such extremes are a perfect indication of major turning point.  

Thanks to Indian government. The spot premiums continue to rule high during the festive seasons amid artificially created shortage. All these dynamism gives enough ammunition to gold to fire from all cylinders. And, in the game of chance, one can expect price to surpass the earlier peak.  

Entering into an interesting phase in the history of gold...

It’s a blockbuster...

Equivalent to the Chennai Express opening! Ya, that’s how Raghuram G Rajan swearing in as the Chief of the Reserve Bank of India was widely described in the market circle with live media coverage further raising the pitch; I haven’t seen such a live swearing in for any of the RBI Governors’ till now. Why is it then different this time? Why is Dr. Rajan different from others Governors?

The Murphy's law - anything that can go wrong, will go wrong - is at full force in India. When policy paralysis and politics have taken us back to 1990s, and at a time when most market participants are doomed, searching for life, and almost one third of corporate planning to be an NRI if this situation continues, India is a place where no one wants to touch, leave alone thinking to live here.

Dr. Rajan is not only the man who predicted the 2008 GFC - its cause and effects, but the one who knows some possible solutions as well.  India isn't in a much different position than the US in 2008. It is the same politics and populism that landed us to the current crisis. And, in the midst of all these chaos, we are blessed to have yet another (Raghu) Ram who can potentially save India from going into docks. He is the right man at the right time and at the right place.

Quite smartly starting from his swearing in to the first press conference post the Governorship, Dr. Rajan has turned the pessimism in a much calculated way. He may not be doing different things, but he surely does things differently. There are lot of low hanging fruits which our bureaucracies have failed to appreciate so far. And, it requires an ex-IMF chief to identify this. The irony nevertheless is we require Dr. Rajan to implement his own recommendation that he made during the 2008 GFC for India - You now know the speed of Indian Government and its bureaucracy that took us back to 1990s.

In a first of its kind, the RBI chief is a non bureaucrat who understand how the modern economic works, writes blogs among other so called non conventional stuff. It is a welcome change that we have been waiting for so long. And, market saluted this change with a near 1000 point up move in Bank Nifty - a 10% move in Bank Index in a single day is crazy and unheard of so far.

...as a pun in the ET goes, this "Raghu can be Market's Ram".