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.

NB: The information, tools and material presented here-in are for informational purposes only. This should not be considered as an offer or a solicitation to sell or an offer or solicitation to buy or subscribe for securities, investment products or other financial instruments, nor to constitute any advice or recommendation with respect to such securities,
investment products or other financial instruments.
20/1/2014 04:15:50 pm

I like your graphical representation. it clears every thing to us. Thanks for sharing

ashutosh bhogra
9/3/2014 05:39:59 pm

I read your book cover to cover. Wow! Good job! But have to restudy to grasp so much I guess. This above chart of RBI liquidity shows then that the govt is doing the right thing now. But how cone? And do you have an updated chart?
Thanks for all the help!

17/4/2014 07:45:46 pm

Good article. But key issue in Indian bubbles like real estate is much more complex. There is a huge amount of "black" - undocumented wealth that flows here. Can the liquidity graph you created, really predict the liquidity increase due to black economy - which typically will peak in poll days?

Nikhil Agarwal
8/9/2014 07:28:07 pm

As per me the black money which we are all considering as really back is not just the undisclosed money which has generated in India & not disclosed with the India authorities but the money which has been sourced from outside India to inflate the real estate prices through some hawala system & invested here

10/3/2015 06:12:50 pm

Sensex touched 30000 :-p
.best of luck for your future predictions.

14/2/2016 01:07:32 am

Now it back @ 23,000, endless money printing cannot survive for long.

2/5/2015 08:03:52 pm

Great Blog.

Would you mind sharing a high level definition or formula you use t o define liquidity for your charts ?



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