Macro plays are over

Macro plays are almost over. The sooner people understand the better. The markets are strongly correlated at the time of crisis, or when they fear a crisis. Not much integrated when they recover. Its simple to see through an example - When sandy was approaching NYC, everyone be it rich or poor, elite or bourgeouis, were equally afraid and life came to standstill for all. Perfect correlation. But the moment sandy passed, correaltion broke. Each one went back to his own unique ways and their lives began to move at different speed.

So since the crisis storms have passed, follow the right stories now. I think infra will be the big game this year. Pick the beaten down stocks there

6000

People who read this blog wouldnt be surprised about anything that happened last week. So lets not disrupt the apple cart and stick to the targets mentioned earlier. While we set the thing on cruise control, its time for something else. I occasionally pontificate on behavioral dynamics of market and increasingly am getting convinced that money can only be made out of players with high conviction about wrong events. Against people who throw big money after crappy cards. I shall refine this thought through 2013 as to 1) how to identify and 2) how to profit out of such strong hands. Happy cruising

2013 forecast

INR - The inflation adjusted REER or the forward points suggest that INR will touch 60 this year. But I dont think this is gonna happen. The money pumped by QE machines are finally going to reach India this year. And we may see INR reaching 50 by end June possibly.

Nifty- Fiscal cliff will create short term bumps, but road is smooth beyond that. Nifty to breach 6000 by q1 and trade above 6000 for most of the year. I see nifty scaling all time high this year.

Bonds- Bond yields could slip to 7.5 as rate cuts begin but will start inching up from there on. Chances of more than 100 bps cut are bleak in 2013

Gold - Gold will show $1500 this year. Could be the worst performing asset this year. Some central banks may unite to prick this bubble.

Fiscal cliff approaching climax

Time to fasten seat belts. Consider buying put options before heading off to beaches

At the mercy of RBI

So I was right that markets will take a breather last week, but I was wrong why. Well not for the first time and hence time to share some learnings here. Macroeconomic events by themselves can not dictate market momentum in any major way, rather they only shape narratives to reinforce market dynamics for a certain while. For example, not a soul in the world knows whether 120k NFP addition next month will be bullish for the market or 160k. It would only depend on the context of the market at that time and a little bit on what market consensus will estimate then. In the slow changing world that we live in, mind you, nothing is a game changer. And certainly not that thing which an economist is telling you.

Having taken a heavy dose of self deprecation, I hope ordinary folks should start liking me now- my cherished dream since long. The market will correct further this week. In fact my guess is market wouldnt recover till rest of December. Central bank is at a kissing distance from victory over inflation, and whether they double their gusto or choose to uncork the bubbly, will be known this week. The only reason Nifty remains a medium term buy is due to Chidambaram. He knows his stuff and is the best man in charge.

QE4 not now

I am having second thoughts about writing this blog. Because I suspect audiences of blogs like this are yet to develop the taste for the quality that I am going to provide. Also I am not a big fan of firing airguns aimlessly. But existential questions for later

First a recap of last week:

It was FDI on and FDI off market last week with unexpected twists and turns in the two houses. It ended on a positive note for the government and so for the markets. FDI in MBR is now a law and very soon walmarts and tescos will show up. The reform processes unleashed by PC got a boost and stage is now set for more bold actions. Separately RBI guvs rambled about growth inflation dynamics and how they would take that into account in subsequent policies even though current inflation is above their comfort zone. Whatever that meant, but bonds rallied.

This week:

Heavy week in terms of domestic data and also the week where FOMC members decide upon the trillion dollar question. I believe markets will take a breather as Fed may play spoil sport this week and RBI repeats the same next week

Nifty 6200 or 5600?

It is no secret that this ball is clearly in government's court. The latest leg of rally has come after political stars began to align for retail fdi. Global risk appetite has also been supportive esp after fiscal cliff (or bluff) stopped making sense. Better captured here http://www.newyorker.com/online/blogs/borowitzreport/2012/11/please-stop-talking-about-the-fiscal-cliff.html

So now cutting to the chase, go with Obama and PC, and therefore for 6200.