FII's turning bearish on Sensex. Liquidity flows holds the key.

Yesterday market was falling like 9 pins and there was no buying support seen at all for any kind of stocks be it a bluechip counter like Bharti or be it midcaps like Ashok leyland etc. Worst hit was metal index as commodities kept on correcting on the LME also. All of this can be attributed to only one thing "Liquidity". Our market kept on scaling new highs because of this single factor (inspite of attaining premium to strechted valuations) and now they are falling because of this single factor. Most of the FII's have started pulling money back from our market. Noumara fund from Japan has given an year end target of "7000" for Sensex. So all this may just be the begining of a bear market which will remain for atleast 4-6 months. I dont want to sound hawkish but let me put some figures in perspective. To date FII's have pumped in somewhere around $4.2 Billion this year and they have just pulled out only $1.5 Billion. A lot worse can happen to our market if FII continue to pull out this money. Also mutual funds have also exhausted their cash surplus which they were sitting onto in the begining of May as they were net buyers on every single day in May 06. Also FII's which are shorting the market heavily are not willing to cover up their positions at even these levels. So they believe that this market will fall further. Fed rate hike picture is still not clear as analysts are not able to gauge anything from the minutes of FOMC meeting held on May 10 which were released on Thursday. All in all, things are still quite mirky there and it is better to be out of the market at this point of time untill this period of high volatility comes to an end. I believe that we will see a Sensex level of 9500 and Nifty of 2750 in near future.

We may for sure boune back today on the back of firm US markets and a rally in Latin American markets like Brazil was up 3.3 % etc. But I would suggest that people should use all these rallies to exit and then buy your portfolio again at lower levels.

Quote of the day: ``In bear markets, stocks return to their rightful owners.'' -- J.P Morgan