Yesterday, RBI paused its rate cut cycle citing inflation worries.
Apparently, everything in India is prone to inflation except stock prices !
Out of around 1354 stocks which are regularly traded on NSE, around 1090 stocks (a whopping 80%) are trading below their 200 day averages and only 264 stocks are trading above their 200 day averages.
This is when the Nifty is trading flat for the year to date and is slightly above its own 200 Day average.
One wonders what will happen if the Nifty were to crack 15%-20% from here.This is not an unrealistic possibility considering the following:
- Global liquidity is tightening, sending the $ higher and emerging markets crashing
- RBI has little/no room to raise interest rates
- Elections round the corner ensure that domestic liquidity is tight and investment climate subdued
- Absolutely no chance of any reformist policies being passed
- High chance of budget busting policies (Food Security Bill etc) being passed