Sublime Consulting

The Fed has once again [50:50 Fed Funds rate cut and Discount Rate cut] unleashed the animal frenzy in the markets..
The rupee closed yesterday at 39.88 per dollar..
The currency has risen 11% since January 2007!

Indian markets are going to witness a never before fund flows from multiple segments..
In the last two days, FII inflows into the equity market stood at $608 million. Till date the FII inflows for this calendar year have already crossed $ 10 billion..
Raining wealth?!

Let me try and list out broadly the segments who could possibly contribute to the stratospheric highs of Sensex reaching 20k :
1. The existing ‘waiting on the side lines’ money from FIIs, Domestic Institutions and Retail/HNI segments.
2. The first time retail house hold investors who would enter the market through direct/Mutual Funds/ULIPS. The retail participation by house holds for FY 06-07 was a mere 6% of their savings into equity markets. This pie could significantly go up at the cost of the most dominant savings mode - Bank Fixed Deposits which is currently at 47%.
2. More and more hedge funds will enter the ‘arbitrage game play’ due to the return of the yen carry trade in a bigger manner [since BOJ went on the ‘hold’ mode with respect to interest rates]..
3. Newer Private Equity funds will find its way into the domestic markets..
4. The latest animal to the party, ‘Sovereign Wealth Funds’ would also try to wriggle its way into the market.
5. New Retail Investors from U.S. and other the developed world will join the bandwagon via India focused oversees Mutual Funds .
6. Last but not the least.. the NRIs pre-dominantly from the Middle East and other parts of the world will rush in as well..

In retrospect, at the start of the year 2007, I came across a very interesting column by a Neo Wave Technical Analyst who goes by the name Milind Karandikar whose column appeared on January 8, 2007 in the Business Standard’s ‘Smart Investor’ section.

According to Karandikar, “We are in the 5th wave as per the New Wave Theory.Wave 5 usually covers 100 % to 161.8% of the price action of Waves 1 and 3 combined. On a logarithmic scale this calculation sets a target of 20,000 plus for the Sensex. And that could happen in the year 2007 itself. Those who cannot over come the general feeling of nervousness would miss a life time investment opportunity, that the year 2007 presents. My advice to small investors is to over come this fear of heights and invest. They should take this opportunity; else the other wise men will take it away”.

Well.. there definitely seems to be a case for the build-up for the Sensex to hit 20,000 soon..

Hey..Should you and I join this party at all?
I am thinking..
Wait till I re-visit this subject[in the next few days] with more data and research and pen down my thoughts again ..
Meanwhile.. If you can’t wait to call your broker now, remember Jim Rogers latest quote ” Every time the Fed turns around to save its Wall Street friends it makes the situation worse. The dollar’s going to collapse, the bond market’s going to collapse, there will be a lot of problems in the U.S.”