Special: When a rally is inevitable, sit back and enjoy

It is not advisable to put the 'fundamentals' arguments in front of liquidity-fuelled bulls

When Business Standard said that Bulls see a ray of hope three weeks ago, it was still not fashionable to do so. Worries about Europe still loomed large, India’s growth numbers were already hopeless and falling and the government looked more impotent than ever as opposition was literally hauling them over the coals.

The ray of hope remained just that for the next week or so as the Sensex reluctantly loitered into the red losing 50 points or so each day as the Parliament closed without business.

Suddenly, one Saturday the government pulled a rabbit out of its hat with a GAAR report that exceeded expectations. In addition to the three year deferment of the controversial rules, came the icing of a proposal to abolish capital gains tax on securities transactions.

 

The market reserved its judgement on the move till the European Central Bank’s crucial decision. Draghi’s move to buy bonds unlimitedly set the bulls off the leash.

Today, as we stand a good at 18,369, a good 500 points above the day when we saw the ray of hope, the same principle still holds good: “Never argue with liquidity”. 

And at present, it looks like we are going to have plenty of that. It was only shrewd for the government to capitalise on the global moves by letting the market hear what it so long want to hear. The Rs 5 per litre diesel price hike was one of the demands Devendra Nevgi of Delta Global had voiced three weeks ago when we saw “the ray of hope”.

“There are expectations of RBI cutting rates and some fiscal reforms from the government, such as a diesel price hike. That policy reform hope is pushing money,” said Devendra Nevgi, founder, Delta Global Partners had said.

Now that one half has played out, it is time for the RBI governor to keep his side of the promise.  Nifty's 5,700-5,800 points, then seen by Harish Vasudevan also looks plausible. Morning TV experts have been talking of at least 19,000 on the Sensex.

Remember, India’s fundamentals were not the reason we fell off from the 20,000 cliffs five painful years ago. It was more because our fair weather friends, foreign institutions, pulled the plug from under our 9 per cent plus growth. They did it then because of their own troubles and not because of our mistakes.

Today, they are coming to us not because we need them, but they need a reliable parking lot to park all that Bernanke, Draghi, Merkel and Co have unleashed.

It does not make any sense to talk fundamentals in this scenario. You will be shot down saying that the market will discount what is going to happen two quarters from now. It is not good time to talk scams either.  But, it’s not that bad a time to go out and make some money. It’s been so long....