Volatile conditions continued in world markets including India. The Nifty opened almost 130 points lower, then staged a decent rally to recover all its losses and close absolutely unchanged. As I write, the European markets are down almost three percent. In that respect, the Nifty is certainly outperforming the rest of the world. For how long ?
The Index has broken down from a trading range that lasted almost eight weeks. Such breakdowns / braeakouts have a lot of significance. The market is giving a message: After many weeks of confusion, one side has won the tug of war.
In this case it is the people who think that share prices continue to be high and will move lower. Like today, we will see many intra day rallies, but the net result will still be a market decline. At least that is what we should expect. The markets can always surprise us, by doing something different. That's fine.
The Million Rupee Question:
How should we trade this market ? This is a fair question. I hope to provide my answers over the next few days.
ADB lowers India’s growth forecast to 7.4%
Prompted by ongoing global financial turmoil and weakened investment outlook, the Asian Development Bank on Tuesday lowered India’s economic growth forecast for the current financial year (2008-09) to 7.4 per cent from earlier projection of 8 per cent.
My Notes: This is not good news. The market may take its time digesting this piece of information. Now this is disturbing in many ways.
First, in the growth pie, the rich make the maximum claims. Whatever is left is given to the middle class and the poor. This is the trickle down theory, ably practiced for past few years. (give the rich, maybe something will trickle down to the others). Thus, a slow down in growth will affect the needy much more than it will affect the few hundred thousand rich in india.
Second, slowing of growth is likely to have an adverse affect on the stock market, sooner or later.