By krsna Khandelwal – A veteran market analyst
Friends,
The melt down of Nifty to a level of 4040 has really been unnerving not for the fall it has suffered but for the way has been punished and no class of investors and operators have tried to intervene. Another point for which I feel unable to find an answer to, is the discount of over 1.5 p.c. suffered by July Series Nifty Future. This apart, there is generally a negative ‘cost of carry’ in case of most stocks and this only suggests that the large investors are not interested in effecting deliveries and also may be the that the professional bears have had to go for the final assault with borrowed stocks for which they have suffered the costs of high order.
Other things remaining same, the above scenario usually transforms in to the reverse happening with equal and opposite weight, as the scenario presented above is at a decidedly low point of nifty. It is not that a similar scenario at a high point i.e. standing tall after a recent reckless bull run, will also see prices surge further.It will see the prices coming down, in fact.You may better understand it this way that the scenario representing such unnatural extremes suggest that there are certain forces keeping it that way and therefore eventually will have lost capacity due to exhaustion and fatigue.
The logic is simple that the initial positions taken by bears are not getting squared up due lack of supply in market and there is need to create panic to be able to at least grab stocks from weak holders.They also understand that time is running out for them due to approaching result season also that some positive developments may become noticeable and may invite bulls or rather investment by big pools of idle money.The political thaw in SP’s relationship with Congress leadership on local front as well as the markets around the world having stabilised the inevitable may happen even in the opening session on this 1st day of July,2008.
Please excuse me for being so positive,in fact basically a fundamentalist in the field of investing and find it difficult to change stance.Those who have been following my writings would have noticed that I started crying foul way back since Oct 07 when the Nifty had just raised its head above 5000.It kept its journey on till early Jan 08 and since then while companies have still not posted any bad results as a whole there is loss of value to the extent of more than 30 p.c. from the precarious peak. This will explain many of the surprises that one encounters in everyday interpretation of the facts.
Hari Om
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