Dow Jones Not Underperforming Emerging Markets

Let’s First Have a Look at Indian Sensex

Sensex touched the Figure of 1000 in July 1990

In July 1990 17.4 Indian Rupees Could Buy 1 Dollar

Now Suppose an US investor wants to buy 1 Sensex in 1990 he could buy 1 Sensex for 57.47 Dollars

Now Suppose He sells that 1 Sensex in 2008 at the Sensex top of 21206 and 39.2 Indian Rupees able to buy 1 dollar, he would get 541 Dollars

Now Lets have a look at Dow Jones

When Sensex touched a figure of 1000, Dow Jones was trading at around 3000

Now Suppose Indian Investor wants to buy 1 Dow Jones then he would require 52200 Rupees for the same.

Now if the Dow Jones is sold in 2008 at an all time high until now of 14297 when 39.2 Rupees can buy 1 Dollar, his returns are 560442

So in the Long term both the Indexes have given similar returns with the only difference being that since Indian Rupee depreciated against the Dollar hence the Indian Sensex moved more then the Dow Jones.

Also while the Dow Jones moved to 12000 in Jan 2000 from 4000 in Nov 1994 the Indian Sensex barley moved in the same period, while when the Sensex moved from 6000 in Jan 2000 to 21000 in Jan 2008 the Dow Jones was nearly stable in the same period.

Similarly if you have a look at the Emerging Markets like China, Brazil, Mexico, Korea, Indonesia, whose Indices have doubled or even quadrupled from their 2000 highs, you will see that there currencies have depreciated hugely against the dollar in the nineties and also they did not give a big upmove in the period between 1994 to 2000.

Monday Could be big day

Right Now at 2.58 pm as I am writing just 32 minutes from Market closing 4640, The Nifty might closein at 4620 and 4620 was the big support the bulls were taking uptil now. Today Friday is a important day for US market trading as US Jobs figures are going to be released today in the evening by 6pm India time. Now if the Jobs figures show bad news the US markets might drop sharply. Asian Markets (should I say just hangseng) which have not gone though bad patches inspite of US markets having bad days of lately can react by opening Gap down on monday which can cause a bad opening for us on Monday. Lots of 4500 puts have been written and the premium too is sufficeintly down compared to March series, hence 4600 put could be bought at near about 140, but since tommorow i.e Monday could be make or break day hence 4800 call or 5000 could be added as an hedge.

Would the Market sustain Rally?

Apologies for not writing for last two days, due to personal problems could not write for last two days. A Gap up opening of 4910 on the Nifty is probably on cards, a mild correction towards 4880 would be the place to go long, and worst case scenario can be 4860 on the Nifty. If the Nifty drops below 4750 it might not go past 4910 as of today. Way the Asian Markets are panning today might not be the day to use every bounce to sell. For Options I think 5000 Nifty Call could be bought in a range of 120 – 140 target could be 160 – 180 if Nifty moves past 4920.