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On sovereign debt crisis

It is causing a bit of panic in the system but the only silver lining if one has to look at it is that this thing is not blowing up as a complete surprise in the face of global markets. This problem of Greece, Portugal has been spoken about quite a bit over the last many months. When things are bad but the market knows that things are bad then the reaction sometimes is not as catastrophic as we saw with the Lehman episode. Lehman suddenly blew up on your face. That was a true accident because the market did not see it coming and therefore the reaction was huge.

Greece is a problem and Europe will have to deal with it maybe there are other countries which are problematic which we don't know off and the market will react to it as it reacted yesterday. But will the reaction be as catastrophic as the previous Lehman episode? That is what you want to ask, because you want to ask yourself whether this is a knee-jerk reaction, which probably presents some kind of a buying opportunity if not today, over the next few sessions if the correction deepens. Or is there something which you cannot map and game and put your finger on and therefore you may buy and then see the markets down another 10-15% after that or more like we saw in 2008.

That I think is the central question but it's impossible to know the answer to that. The only thing one can suggest is that this market has probably seen coming fro a while and therefore the element of surprise may not be as high as it was in 2007-08.

The one other takeaway which is important to remember since we are basking in the glory of our own GDP growth numbers is that India is running a fairly significant deficit, it is not near as alarming as Portugal, Greece or Spain but if you are talking about 12-14% deficit in those countries our consolidated deficit is also in double digits and we should not forget that and sometimes when global investors get scared and they have a bad experience in a few nations because of the deficit problems, its quite conceivable that they turn wary of countries which are running large deficits even where the quality of growth is good and its also conceivable that some of those countries then become relative under performers because of their magnitude of their fiscal deficit problems.

You may argue with that stance but you cannot argue with money flows. So I think we need to be a bit careful out here going into the budget on what signal we are sending out on our fiscal deficit in an environment where people are increasingly getting worried about sovereign deficits across the world. Again to reiterate, we are not being alarmist, India is not Portugal or Spain but we do have a fiscal deficit problem and global investors are perfectly cognizant of that.

On Nifty

We will take out our previous low. This is the disturbing thing this morning because not only will 4,800 be taken out but the key thing is that 4,770 which is the panic low, which we saw on Monday, will be tested again and maybe taken out in early morning.

Technically, we will form a new intra-day low in the context of this down drift. This is exactly what the traders don't like to see that successive new lows from a trading perspective are being formed. We have not had a positional low. We have not gone back below 4,540 that is a medium-term low which should not get violated if the groove is in place. In the near-term, 4,830-4,770 today is a lower intra-day low. We are not making higher near-term peaks.

We have stopped at 4,950 and have not been able to go up. That is typically from a trading perspective not a great sign. Let us see if today we can bounce back. We need to do certainly get back during the course of the day after the initial panic and close above 4,770, better still 4,800. Otherwise, there might be a bit of a trading issue.