The markets began rallying when RaghuramRajan took over as the new RBI governor. This rally led to short covering and some sharp FII inflows as well. The rally had a blow off on Tuesday when we reopened after an extended weekend on account of Ganesh Chaturthi and the Syrian crisis being partially resolved. The rally which lasted five days saw the Sensex gain almost 1,800 points while the NIFTY gained close to 600 points. The rally was over 9% and it took a mere five days. Call it Diwali or call it a standing salute or call it coincidence. This rally is backed without fundamentals and can be best termed as being a ‘cheaters rally’. How much more it will last is a guess as good as yours.
Over this weekend Russia and America have agreed that Syrian chemical weapons will be destroyed over the next few quarters before the middle of 2014. This is good news but the effect that it could have had on the markets is over with the stand taken at G20 summit. This news would therefore hardly impact the markets.
The week ahead is important in the FED meeting on Tuesday and Wednesday. The key issue to be watched is the reduction in quantitative easing. A reduction of 10 billion dollars is given but there could be an impact if this quantum is hiked. The other point to watch out for would be the time in which this amount of 85 billion would be eased of. Closer home in India we have the rescheduled meeting of RBI with RR addressing his first policy meet to be held on Friday. The meeting assumes significance as he would have to address any issues which could arise from the FED easing. The weakening of the currency and the volatility of the rupee would be two key areas to be tackled. The volatility continues unabated and the rupee which gained
The BJP has announced the candidature of Gujarat chief minister Narendra Modi as its Prime Minister candidate. One is not sure how the markets would react to this news as the announcement was a foregone conclusion and it was only a matter of time. The BJP rank and file has reason to cheer as they have a leader to follow and one who has mass following and acceptance. Captains of industry have also welcomed the decision and there is hope that post elections there could be a difference. However one thing is for sure that though the Congress would never concede that NAMO is a tough candidate, there reactions to his announcement let the cat out of the bag. What would be interesting to watch however is whether this would force the Congress to announce their PM candidate or they would refrain from doing so?
NSEL has become a National Scam or shame one wonders. Everything that one can ever imagine has been done. The exchange ran under regulatory arbitrage and was neither regulated by SEBI or by FMC. It did operations akin to an NBFC but was not under the purview of RBI. It apparently lent money rather than commodity trade and did it way beyond prudent norms. Every activity under the sun required to fulfil the obligations for the commodity trade were handled in house by various group companies. The investor was assured through the broking community that the NSEL contract was a safe and efficient manner of earning returns which were much in excess of the present investment returns. And when the cookie crumbled it has left a hole of about Rs 5,600 crs in the pockets of thousands of investors.
Grant and Thornton was appointed by the promoters of NSEL to do a forensic audit of the borrowers and it appears that he believes the so called defaulters of the exchange have been in default for two years. The independent directors on the parent company Financial Technologies have resigned and so have some well respected names from MCX. In a surprising move shares of Financial Technologies rose 44.61% to close under Rs 200 at the bourses. When investigation of all kinds are done why is SEBI not investigating the wild gyrations which are taking place in this stock. It may also be mentioned that this stock is part of futures and is currently in the banned list as open interest has exceeded limits.
Well enough on the National Shame Exchange of Indiaand let’s hope that the FED and our RR make us proud and look for something to cheer next week.
