Unfortunately have been behind in my writing and analysis owing to a recent overload of work. However, did sneak out some time last night to update my computation of liquidity based on RBI data. The downtrend in liquidity does appears to be intact.
However, in the interest of partial discloure, my computation of liquidity is based on multiple factors and data points - some of which unfortunately have a time lag of around as much as 2 months to be reported. Hence the computation of liquidity, as illustrated in the graphic above, lags the actuals by a couple of months. One of the key components in my computation of liquidity is the measure of money supply, where the data is disclosed by RBI fortnightly. Here is what the recent picture of M3 year-on-year growth rates looks to be:
This graph is interesting in the sense that it reflects a minor rise in monetary inflation since the October time-frame. Based on projections based on the variables that I use for my custom measure of liquidity, I feel that it would be safe to assume that liquidity has effectively bottomed out heralding the end of the last phase of the bull markets on the bourses.
The BSE Sensex index appears to be flirting with the 21,000, levels as I write this blog post. There is still an remote possibility of the markets making a top of 22,000 or there-of. However, would advise booking profits and exiting markets at a range of between 21,000-21,500.
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