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Happy Diwali 2008!


A very Happy Diwali to you all, and hope y’all have a great year ahead.

My last Diwali post needs a recap. A lot of stuff out there seems to have come true – the US financial market collapse, big drop in Indian equities, a large scale move by retail (remember, that was November, the index moved up in Dec/Jan and then crashed), and in general bad year for bulls and good for shorters.

What’s now? I have to say that while I expected a hammering I thought it would stop about 15% higher than this. Yet, here’s my deal for the coming year.

  • It will not be a year for the index. The index may gyrate between 1500 and 4000 (Nifty) and is likely to face sharp upmoves and slow downmoves through the year. It will not be worthwhile to invest in the broad index.
  • If 2008 was about world drama, 2009 will be about the collapse of the Great Indian Real Estate Story. Prices will start coming down, though it may take a full year for panic to set in. At least one real estate company – of the big ones – will go bust. At least one bank will face serious threat of collapse due to high exposure to RE. In all likelihood, the government will rescue the banks. Commercial real estate will be in the doldrums, with distress sales reducing prices even more dramatically. NRIs who invested in India and thought they will keep their properties for a good day will call their brokers to sell, at any price. Banks will refuse to lend to real estate. Some may even try to give homeowners margin calls, but that will fail as political pressure will force them back.
  • The dollar, after a small rise, will fall hugely against the rupee. People who hedge in the 50s will be treated as heroes.
  • Inflation will literally die. We will have to face asset and consumer price deflation, and are likely to take political measures to introduce more money into the markets.
  • Interest rates will fall suddenly; and so will consumer oil prices. This will not be enough to keep growth up for the year, but it will be a good setup for the years to come.
  • India, along with the world, will go into a severe recession. This means contracting GDP (no more 7% growth), unless there is a black-money-amnesty scheme set up, with dramatic tax cuts.
  • When interest rates reach 4%, equities will again be considered a good asset class, and more of the middle class will get in. More money will flow in from Pension funds, EPF and other long term saving sources.
  • This will be the year of individual stocks. Some stocks will give 100% to 200% returns in the next year, and some of them will be large caps; some others will be midcaps.
  • Job losses and slowing economy will result in political stress. If our public will not fight the stupid politicians, we will end up with a socialist setup that has no hope for recovery.
  • I will try once more to lose some weight. I will be successful this time.

These are all random predictions, with no bearing on what will actually happen – so please, don’t take these as advice. It’s for my own record; what I was thinking etc. It helps to later go back and say, “what an idiot I was”.

For the Record, Nifty closed at 2700 today in Mahurat Trading, and Sensex at 9000. I gotta see what happens next year. Till then, I’ll be posting other random stuff. Disclosure: Some positions on the Nifty.


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