The Vulture is a Patient Bird - Sainik

It's that time of the year when everyone expects things to happen; it does not happen, and then the frustration sets in. Will this time be any different? Up until now it's playing perfectly to the script.

The last of the results of the Sensex have come in. Tata Motors and SBI stole the show, Bharti and Tata Steel were average. Twenty six of the 30 companies have reported their results and they have shown a growth in operating profit of less than 10 percent.

Analysts have been quick to downgrade sensex 2011 earnings, by around 10-15 percent, but are the estimates still too high? This quarter will be most crucial for the economy as the cumulative effects of large base effect, inflation, tight money conditions, skewing of the monsoons (Large parts of East and North-East are suffering from drought) will all come in to play.

This will be contrasted with the still positive money flow from the FIIs, making it a heady cocktail for high volatility.

The NSE Vix, which is a gauge for volatilty, has hit a new low last week. This means that the market men are very complacent about the direction of the market. Most market watchers are still sticking by the 5350-5550 range.

Usually the market proves the consensus opinion wrong. Something has got to give. Which way?

The answer may come from overseas, the movement of the US dollar could be a give away. There is some correlation between the movement of the dollar and fund flows to risky assets, i.e. stocks.

For the past eight weeks the US dollar index was relentlessly coming down from a high of 89 to a low of 80. Then last week there was a quick rebound and now it stands at 82.5 levels.

My personal take is that the US dollar index will scale the previous highs of 89 in a matter of time. Watch the widening of spreads in the bond markets of Italy and Greece last week.

So what do we do now? Adopt the same strategy of the last week? Be alert, if the nifty starts trading below 5350 with high volumes.

The smallcap and midcap index has outperformed the main index the last few weeks. Time to definitely book profits in the scrips which have had a runaway rally.

Wait patiently for the prices to come down. The Vulture is a patient Bird. Whatever you do, hope it's profitable.