Although i might not be well qualified for the view on the current Scam or bribery announcement. But there are serious questions which can be raised which have not been answered.
- > Is the current scandal a scam for fake loans or is it a bribery scandal. If its scam is it going to turn into NPAs for Banks or is it just a case where bribes were taken to expedite the process ( Corruption is a way of life in government run institutions)
- > Which are the companies involved and whether loans are backed by assets or is the money been siphoned off which doesnt seem to be the case.
Now some questions which came in an evening discussions and not all are my views
- > Money Matters Financial was recently quoting at a market cap of 2000 + crores and had become a leader in the Debt Market. For the record ENAM was taken over at 2100 crores. Motilal is valued at 2400 crores.
- > So was it a case of too quick too fast for a company of such scale ? Also company could raise 465 crores recently in a QIP. Could it also be some rivalry or a market correction for business share!
- > Also the timing of the inquiry is very unusual a day before expiry at 2.30 pm. Will we see a huge cost of carry this expiry too !
- > Banking Stocks have already corrected 20% from the peaks before the scam.
- > Sensex has dropped 10% from the peak already on back of a stream of bad news.
One thing that struck my mind – Before January 2008 ! we saw a Participatory Note announcement and a 10% lower circuit making a low of 17k and ending up at 21k in next 3 months. Uncanny resemblance/ wishful thinking – Time will Tell !
The questions keep going and going but one thing which is certain is this will bring in good governance and Markets have never topped out with a scam ! but bottomed out with one.
Maintain the long term view on index. Best case we bottom around 19200/19350 or go to 18500-18800 ( only if there is some more forced news ). Investors can continue to start dipping into their cash reserves and keep buying till 18500-18800 or on move above 20100. Review the situation in end of December.
I havent been able to update much in the last week due to technical problem with my system. So will be back on track from next week.