Regulators Soothe Sensex Nerves

Awanish K Mishra

We have witnessed the worst of stock market last week (6-10 October 2008). Now one should be prepared to cheer for the best of stock market this week (13-17 October 2008). If Nifty gains by 1000 points in 10 days, no one should get amazed. Of course, there is a logic behind this optimism. Last seven days have been the days of turmoil for stock market. Sensex and Nifty suffered unprecedented calamity. Front running stocks turned into game spoilers. This is where our regulators jumped into action. Finance Minister Shri P Chidambaram assured and reassured investors about strength of Indian economy and promised swift and timely action. SEBI’s tough talk deterred manipulators from creating mess and RBI acted to infuse ample of liquidity into system. Regulators’ timely action has started soothing nerves of the market. The reassuring words of Finance Minister at 9.40 in the morning on October 13, 2008 has led the BSE sensex jump by nearly 800 points. The Logic Behind Optimism Capital market is ready to cheer in this festive season. There are several reasons. First, there is nothing wrong with Indian Economy or Indian Capital Market as such. Second, oil prices has tumbled below 80 dollar per barrel. Third, Indian Regulators are proactive and geared up to insulate Indian economy from the heat of global credit crisis. Global Heat Felt In India Sensex and Nifty have been tumbling down due to global financial market turmoil. For last fifteen days, global financial market turmoil has been dominating Indian capital market. In panic, we forgot that our market, our companies are not affected to the extent, we are speculating. We have a robust banking system, we have stiff regulatory measures, we have tight monitoring mechanism. It’s true that global recession may affect us, but not to the extent we are afraid of. Regulators In Pro-Active Role To the investor’s delight, our banking regulator has been so swift to inject liquidity into the system, that RBI cut CRR twice in five days. Finance Minister chose to address media before the opening bell. PM’s economic panel came out with more positive observation. One would feel comfortable to note that Ministry of Finance decided to prepone the release of inflation data on 10th October 2008 to cushion stock market. There is a buzz of interest rate cut, SEBI may tighten grip over financial intermediaries for spreading rumors and manipulating stock prices. Government may relax ECB norms further. FM has assured that he is taking stock of situation on hourly basis. India Will Cheer Amidst Global Turmoil No doubt, global credit crisis has created difficult situation. But we have created a robust mechanism for stormy days. IMF has reaffirmed Government’s view that Indian economy will register 7.9 percent growth in current fiscal year. Our only problem has been inflation. But inflation has started receding and will go into single digit by March 2009. Added to that, the most prominent factor behind inflation- sky rocketing crude prices have come down to 78 dollar per barrel from the peak of 147 dollar per barrel. There is fear, that upswing in global stock market may lead to a rally in crude prices as well, but it may consolidate around 100 dollar per barrel. Nifty Support And Resistance Levels Market technicals suggest that if sensex crosses the barrier of 11300 with good volume, it may go up to 12200. I hope, that this level of 12220 will be attained this week. Similarly, if Nifty crosses the barrier of 3539, it may go up to 3750. This may also take place this week itself. There are huge shorts in the system. If these start unwinding, market may see new highs. Let us remain hopeful to see a better Diwali emanating from a battered capital market. (PIB Features) *Editor with Pearl News Network.