Too hot to handle!

When you hit the peddle to the floor the vehicle moves fast and when it gains momentum you ease on the peddle. When you don’t do that, keep the pedal to the floor for an extended period of time, the vehicle keeps picking momentum until a point where you start to lose control. Over the past 30 days the market kept taking the momentum and did not ease one bit, so today’s fall was expected and also in a way good for the market. Had the momentum taken the market’s to dizzy heights, then the fall could be been that much sharper and painful.

So the momentum has stuck on, I would imagine and the pull back could be a few more percentage points, however, looks like we would be ok in terms of corporate performance since now corporate are increasingly getting into a belt tightening mode to protect margins and profits. So earnings should stabilize this year. This period therefore is extremely crucial for us to take selective entry into the market with every passing correction.

When the positive momentum starts to build in from a structural point of view, then these corrections will become very short and small. We are yet slightly away from that point. At this moment it would look like we are heading into 4000 points on the Nifty. Actually, I would imagine we would never get there. The low point has occurred sometime last year and could be tested, if at all, and then head higher gradually from here. Ultimately, there is no place else to go and this would be evident from each passing quarter. Of course it would be extremely painful to experience the same.

Today was particularly notorious for performance from BHEL. Reporting disappointing numbers earlier, the stock did face some stick in the hands of investors. If today belonged to BHEL, will it be SBI tomorrow, since the bank reports earnings. And I would be the last person to be surprised if it reports ugly earnings. According to me, the surprise element was taken away, when earlier this month the chairman indicated that the KFA debt is essentially an NPA and that there are scores of such hidden ugly loans in the balance sheet. So we have no choice but to wait for the can of worms to open tomorrow. In all the doom lies opportunity. Only if we spot it and sit tight. Indians that we are, we are never accustomed to sit tight.

At least, sleep right, good night.