Stocks hammered, Metals Butchered, Real Estate Slaughtered

MUMBAI. 10th October 2008. Share Markets world over are witnessing a crash with Dow Jones hitting 5 year low of 8600 and Sensex plunging by 1090 Points in early trading on Black Friday.Stock Markets in Russia, Indonesia and Iceland remain closed due to unusual movement of market.

RBI has cut CRR by 150 BPS to 7.5 per cent which is effective from 11th October 2008 and cut in interest rates is also anxiously awaited by Industry. CRR cut will infuse and pump in fresh liquidity of Rs 60000 Crore in the Banking system.

Rupee has hit a low of 49.30 per Dollar.

Sensex is inching towards 10000 Points and free fall of shares may find some support at 7500 Points. Several Brokers are facing margin pressure and will be required to square off their positions to sustain in the market.

            FIIs continue to be Net Sellers and until or unless there is flow of substantial funds the short term outlook for the market is gloomy. Several Investors have already asked their Brokers to press Stop Loss Button after getting margin calls from Brokers. Though Domestic Funds are buying heavily in Sensex based shares; even flow of funds with Mutual Funds, UTI and Insurance Companies may not sustain for a long period as selling pressure is too heavy for such buyers to contain the downslide and their inflow will not be able to match outflow of FIIs.  Even domestic Mutual Funds are facing redemption pressure. Small Investors who are still adopting wait and watch attitude are all set to lose their shirts while the operators are swift to exit from the market. But Brokers are happy that retail investors have not yet pressed sale button. But if everybody starts selling, then what will be the bottom of the market is just anybody’s guess.

Greed of higher return tempted the investors for playing blind in the market ,who are now regretting not investing in safe bank fixed deposits with 11 per cent interest. Even some non-PSU Banks are facing liquidity crunch due to heavy investment in market and in companies which are not providing any return to them and are finding it tough to return the money to depositors. Private banks are ,therefore, looking for funds at exorbitant interest rates and market is already abuzz with rumours of a Leading Private Bank facing liquidity crunch due to its unsecured lending and high risk non-return investments. Many depositors have already started shifting their deposits to PSU Banks which are considered safer due to Government stake. Even Government of India has also issued directions to PSUs to park their surplus funds in PSU Banks only.

But what happens if you have a fixed deposit of Rs 25 Lakh in a Bank and Bank goes bankrupt. You will still get Rs 25000/- as the deposits by an individual account holder in a bank are insured and thus guaranteed upto Rs 25000/- only. It can turn out to be more riskier than even stock market if the Bank goes bust. If rising Gold prices are any indication; gold is being considered a safer investment by the investors and the return on gold is not subject to TDS as in case of interest on fixed deposits, though one can be liable for capital gains tax when there is sale of the gold.

Copper, Zinc and Nickel prices have also fallen considerably in global markets and Real Estate has also to bear the brunt and fall in Real Estate prices is imminent as Asset Prices have fallen all over the world. The world is heading towards a great recession. JD has already forecasted collapse of Auto Industry in 2009.

 (Source: Allindiantaxes)

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