The Valuable India!!!

Near 20% move can wash up a derivatives portfolio or double it in a day. We don’t specially focus on risk management in our research, but these are the days, when we really think of stressing more on risk management than on forecasts. Despite everything, event risk should be best avoided or handled with long options than with futures. If you think you were smarter getting away with doubling your portfolio, you are fooling yourself, as volatility is a double edged sword. It can cut you as well as it can hurt your counterparty.  We were on the wrong side of the market. Strangely we were receiving congratulatory calls from people who remembered our work on LONG INDIA, SHORT CHINA we wrote on 23 Feb this year. The pair made 50% in three months. The idea is still about risk management than just about being right. Being right 9 times and wiped out the 10th time is worthless. A few even called us regarding the possibility of a review of our annual target.

This is what we said in our 2009 India Outlook published in Jan 2009.

“We won’t be surprised if prices retest Oct lows or breach them marginally early Q2 2009. And this means selective stock picking and better to minimize market exposure by doing quantitative long short strategies. 13,000 - 15,000 is an achievable high for Sensex in 2009.”


After Sensex 10,500, 12,000 was something we could give it to the sentiment, but 12,000 to 14,284 is an extremity for us. We rather ignore Sensex than try to ride it now that we have the first monthly open gap in 10 years. At 60% INDIA leads the FEB-MAY performance rankings  of the top global economies. Russia ahead of India again brings us to LONG INDIA-SHORT CHINA feature which suggested RUSSIA also as a potential outperformer.

 

This is what we said in our feature ‘Russia Oil and the Global low’  report on CYCLES on 15 Feb 2009.
“From one extreme, the sentiment is shifting to the other now, as both Oil and Russia are now featured negatively. We don’t see many long Russia stories, just like we don’t see any long Oil stories. What we hear are dollar 5 forecasts, and how recession and auto demise have killed the Oil prices. Russia’s main exchange MICEX shut down for two days on Sep 16 after it lost 17% in a few hours. This was just like many freezing markets shut worldwide. Now the conventional reasons we hear are the over leveraged banking sector, painful process of restructuring, falling oil prices, real estate collapse, growth grounding to a halt, Russia’s war with Georgia, spooked foreign investors, capital flight, cascading margin calls. There are even comparisons of the current Russian crisis with the 1998 Rubble crisis. A few even say the gloom is not just for 2009, but also about 2010 and 2011. “

Trading gaps of such magnitude have less odds of remaining unfilled. So SENSEX 12,000 should be revisited. A comparison of the worst performer in the table FTSE (UK) with SENSEX also suggests that SENSEX might just have pushed itself over the edge. Sensex should underperform the worst performer (FTSE) for at least a quarter. This means either SENSEX should rise less than FTSE, FTSE should rise more than SENSEX or SENSEX should now start correcting lower, faster than FTSE. A PUT just after the election euphoria should be pretty cheap.

Enjoy the latest WAVES.INDIA and TRADE SAFE.

ORPHEUS INDIA RESEARCH

WAVES.IND. is a perspective product published on Monday and Wednesday. The report highlights Indian Stock Market top sectoral Indices and Sensex (BSE 30) viz. BSEOIL, BSESC (Small Cap), BSEMC (Mid Cap), BSEHC (BSE Health Care), BSEPHARMA (Pharmaceuticals), BSECG (Capital Goods), BSEBANK (Banking), CNXIT (Technology), BSEFMCG (FMCG), BSEAUTO (Auto) etc.. The product also covers all the 30 Sensex components. The product highlights Primary (Multi Month) and Intermediate (Multi Week) price trends. The report illustrates key price levels, price targets, price projections and time turn windows. The product uses Elliott waves, traditional technical analysis tools, sentiment indicators and other alternative research tools like INTERMARKET to spot outperformers.

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