Daily Call - Oct 16 2008

Unlike the western Governments and regulators, which are awfully behind the curve, the Indian ensemble is being proactive and moving with speed and authority. A further 100 basis points cut in CRR, rushing of the farm loan waiver money, added capitalisation of Indian banks, doubling of the FII limit on investments in corporate bonds, are steps that only a confident man like Manmohan and his crack team can take. Other synchronized moves by regulators to double the margins on F&O positions is also a pre-emptive step to reduce outstanding positions, although they are not much.


The banks could not have so much of a good news on a single day. If experience is anything to go by, the markets are likely to adopt the age old tenet of selling on news. Markets are likely to take the path of least resistance, which is lower and may even test the lows seen earlier. Coming back to our regulatory action, while SEBI’s direction to FIIs and their account holders to report every Tuesday and Friday the stocks which they have lent overseas is laudatory, it is akin to closing the barn after the horses have bolted. If the Government really means business and wants to undo the harm, it should call back all stocks lent and then we could have the mother of all rallies. Till that point of time, we will have to be a part of the choir that sings the dirge for Uncle Sam and keep popping honey and ginger laced pills to sooth our soar throat.