Tuesday, 4 November 2008

Wrong Prescription Again

Injecting liquidity is a very short term measure for the markets and the economy. The patient wants vitamins, proteins and carbohydrates so that he can get up and start walking again. I am talking about the Indian Economy. But, our doctor has given him a pain killer and a bottle of glucose. I met a friend here, who said this liquidity injection is like a ritual we have in our homes during January (Sankranti) : we pour sweets, chocolates, puffed rice, sugar cane pieces and coins on the small kids in the house. We call the neighbouring kids who will sit around the kid and collect all the sweets, etc. and then go away. The same thing is going to happen here, injected liquidity will find its way to the stock markets and other markets to buy puffed up stocks which will be downloaded by the FII's.

Expect the markets to come down after the initial euphoria of the liquidity injection and the US Presidential Election. This bearish phase in the Indian stock markets will last till the middle of next year (of course, I am repeating this line again!). So, if you have bought when I wrote BUY you could offload the stocks now and make a neat 10% gain. the Regulators, Government, Politicians and FIIs will give enough opportunities to re-enter the markets at better prices.

1 comment:

Anonymous said...

thats a nice way of analysing the present economic scenario