Thank President Hosni Mubarak for helping you to buy your darling stocks at cheap or dirt cheap prices.

On Friday 28 January 2011, it just wasn’t the Sensex that fell by 288.46 points [ 1.54 per cent ] to close at 18395.97. The Dow too fell by 166.13 points [ 1.39 per cent ] to close at 11823.70 while the Nikkei fell by 118.32 points [ 1.13 % ] to close at 10360.34. Most importantly, Egypt’s benchmark EGX30 Index plunged 11 percent, the most since October 2008, to 5,646.50 at the 2:30 p.m. close in Cairo and trading was suspended thereafter. . Even, the Saudi Tadawul Index lost 430.58 points to close at 6,267.22 points. Yes FII’s were sellers but the epicenter of the crash was not India but Egypt, the land of the Pharaos.

FII inflow in the calendar year 2010 totaled Rs 133266 crore. FII outflow in January 2011 totaled Rs 4220.80 crore (till 27 January 2011) and this effectively represents just 3.16 per cent. Now tell me, my dear stock market ustads where is the flight of hot money happening. If you sell 3 to 5 per cent of your portfolio, will it mean that you are bidding good bye to the markets. Yes, if the FII’s sell off such sums every fortnight /month consistently then we need to be very concerned other wise not. And let us not forget that our stock markets were functioning before the FII’s entered India and will continue to exist much after “hot money” and the FII’s leave our country!

India's forex reserves rose to $299.39 billion as on January 21 from $297.41 billion as on January 14, the Reserve Bank of India said in a weekly report released Friday. OK, we may be far behind China, whose forex reserves surged 18.7 percent to a world-record $2.85 trillion at the end of 2010 from a year earlier. Yes, there are problems like inflation, widening deficit, oil price rise that will further propel cost-push inflation, unemployment and the ever increasing political scams [ 3 G may be the tip of the iceberg ] and that leaves the FII’s wondering whether our country is really prospering or deteriorating May be somebody has told the FII’s that all scam investigations have been kept under hold until the GOI approves and builds a 3 Star VIP jail with all amenities including swimming pool, Spa, Hot Tub / Jacuzzi et all.

Sometimes I feel all stock markets resemble a man /woman whose recuperative system works smoothly and fails smoothly too because of which all is not well at times and all is not well when the person is not well ! When a person falls sick an injection or two coupled with some medicines will make the sick man or woman hop with joy provided the recuperative system cooperates and if it does not, then all hell can break loose no matter how many injections you administer [ read QE1,QE2,QE3 …… QE? ] That’s precisely what’s happening in the stock markets. I am not an Economist but I wonder how China will react if for example, the US says something like : Hey, my Chinese friend, I hope you understand that we cannot import lots of stuff from you guys, post Lehman because we don’t like to work overtime printing the greenback [ by the way we have got lots of greenery across US – even in New York ] and we already have a huge Trade balance deficit with you guys. And yes, thanks for parking trillions of US $ in our Treasury bills – at least allow us to pay interest on the same! And let me check, how much gold we have in the vaults, lest we run out of the greenback [ read massive fall in US$ value ]

And now back to Cairo and the Suez Canal : An analyst for a shipping hedge fund explained that

the spike is connected to fears surrounding the continued operations of the Suez Canal, amidst social unrest caused by massive riots against President Hosni Mubarak’s 30 year rule. “While Suez closure is not much of a threat, shippers are refusing to load in the Red Sea and transit the Canal,” explained the trader. “What’s probably going to happen is that they re-rout ships to the Cape [of Good Hope],” he noted. “[Re-routing] makes voyages longer, which ties up ships and in turn diminishes supply,” said the analyst, “[this] is positive for the tanker market.” And mark my words – I won’t be shocked if Oil soon crosses US#110 per barrel!

Indeed the US may be recovering and that may be good for the global economy but let’s not forget what someone has said about Government statistics : “phony government statistics how long can it go on, paper wealth the government can inflate it, deflate it, conficiate it ,revalue it ,devalue it, print it,, sell and get out fast, the government controls the little bouncing ball.”

Conclusion : Those who are thinking of taking advantage of the sharp dips in the Sensex should defer their purchases by about a week as they may end up buying their favourite scrips that much cheaper. Don't be in a hurry to shop for shares.Expect the Sensex and Nifty to go down by 10 per cent plus this week. And thank President Hosni Mubarak for helping you to buy your darling stocks at cheap or dirt cheap prices.

Kishor S. Khot, [Kishor@hbjcapital.com], Equity Strategist, HBJ Capital Services Pvt Ltd