I have been watching dollar’s watrfall since last 6 months and i expect Dollar to loose further 50% value against precious metals and some strong emerging economies.
But, last friday, dollar closed full 100 basis points up with major decline in Gold. I suspect, this is a time i had ben expecting since last 1-1.5 month wherein Dolllar will go up by 10-15% and against that Equity markets, bullions, commodities and Metals would correct mostly by similar percentages.
ON Friday, Dollar index closed 100 basis points up, Yen registered biggest weeekly decline of decade after rising to 14 years high against dollar, Gold corrected sharply and almost all equity markets made some weak chart patterns during last week, you can call them topping patterns. This seems perfect situation for Dollar’s down rally to halt and reverse for some time and same for Gold and Equity markets in opposite direction.
Do not get confused here, what i am expecting here is a short term pause or rally in dollar. My outlook that dollar will loose as much as 50% value in next few years has not changed by 1 iota. But, there is no market where you have only one sided movement hence consider this as an opportunity to add Gold and probably Equity,too, on decline..
I expect Gold to correct upto $1100 at least. Under severe pressure may correct upto 1080. Largely Gold should not breach support of $1035 in this mid term correction.
Sensex may also correct 10% at least and 22 % max. Sensex has many supports downside but surely market at this level is not cheap for long term buying.
India’s fiscal situaiton has also deteriorated further. From targeted Fiscal deficit of 6% in budget, it has slipped to 7.9% and revenue collection is expected to be 6% lower.
Adding Fiscal and revenue deficits togather, India’s deficit is around 13.9%, which puts Govt under pressure to withdraw some % of stimulus.
Hence, if you are holding Banking, Auto and Pharma stocks, exit from short term perspective since they are on year high level. Markets will correct from here.
Markets will take a fresh look at currency, Govt and Companies debt situation and leverage before breaking on upside.