Market Report

As the Markets around the World are expecting the EU leaders to deliver on December 9th, let me remind you of something from the past, On July 21st, the EU announced that the Crisis is almost solved,On October 26th, they announced the crisis is over, and here comes December 9th. I am not very optimistic about the December 9th meet. Any bad outcome from the meet means, S&P's downgrade.If Germany and France comes out with a credible solution by risking their fiscal situation, again there is a possibility of a downgrade. I would say, EU nations have stepped on a landmine and they expect a miracle to happen.

As Samuelson on his book on ,"Economics", says Recession usually lasts for 6-12months.So can we assume that we are already into recession or shall we call it a depression as some of you may argue that this down trend continues since 2008. Whatever you call it, the situation is not all rosy.Though the Italian 10 year yield had fallen below 6% yesterday and the German Factory output surprised everyone, I am more worried about the domestic problems we have.

Few days back, our own bonds, the 10 year ones, have touched 9% mark.Am sure our Government will find it very difficult to meet the fiscal target of 4.6% of GDP for 2011-12(FM admitted the same). The rupee is weakening at a rapid pace and I don't think RBI intervention is going to help.In the month of November , RBI intervened ,still the currency fell down by 7% in the same period and the reserves dropped by almost 80,000 crores.

With slow growth and higher inflation,it would be interesting to see, if RBI cuts the rates in its next meet on 16th December.If the rates are cut, it would trigger higher inflation again.And if the rupee continues to hover around the 52 mark against USD, the oil marketing companies would be forced to hike the fuel prices(BPCL said, it will hike the prices anytime soon). Adding fuel to the fire is the Iran tension which is sending the crude prices higher.So we may be forced to live with high inflation and slow growth-stagflation.This is worse than the 2008 situation for India.

Coming back to our markets, it is better to be a trader in this markets.I don't see any optimism in the near future, either from the global front or from the domestic front.Expect some of our companies to give a blow in the form of forex losses in the quarterly results.

There is a saying,"The great thing about the stock market is you always have a second chance to get better and learn from your mistakes".

So to get a second chance, you need to have a strict stop loss in place.

Have a Happy trading day!!

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