As a finance professional, it gives some satisfaction when your prediction about the market comes true, but as the markets have tumbled and my own value of investments come down, I am not happy.

After I wrote the piece that By start of Next Fiscal you expect Sensex to Cross 10500 mark, the markets for once rose and crossed 15000 mark, again to fall below 11000 mark, albeit momentarily.

Where are markets headed to go? Finance Ministry is doing its best to assure markets that All is well here in India, but is it?

Most readers would not be economists, so I wont go deeper in fundas, but In any country, there are two types of businesses; one that fuel production (such as food processing, vehicle manufacturing, its ancillaries) and another that spurs consumption.

In India, or lets say in most(or all) of the countries which have any respect for labor laws, manufacturing industry in dead. China has emerged as industrial hub of the world and no country is able to match the prices. Only surviving industry in India is Auto manufacturing industry, pharma industry, and too for largely the tariff and taxation policies. Soon you could have Chinese cars on the road.

Telecom industry is doing well in India, but I make the point that that’s consumption industry. It is driven by income generation that has to happen else where. I see the industry reaching its top in next two years and that’s it.

Now what next in Markets?

Sensex is marginally above 11000. Finance ministry is making its efforts to convince public all is well. US markets too have opened positive today, and above all large investors have to recover some of their investments in the market (I am convinced, despite SEBI, these large investors still play role to drive market).

Therefore, the markets in next few days will play roller coaster, but with tendency to cross 12000 for once.

Government can not bail stock market out. It does not have deep pockets. Indian Rupee has witnessed steepest fall by touching 48.80 level. FII outflow is not stopping. Month of December, even otherwise, witnesses lower FII inflows.

So far, there is no redemption pressure on mutual funds as probably most small investors are hoping their worth to recover principal at least. Even if sensex touches 12000, it is not going to revive confidence, at least for now. Therefore, markets would again witness a fall. To compound things further, a small news is sufficient to trigger a big fall and just four sessions would be enough to make sensex touch 10500.

If in the meanwhile government does not do anything with sincere quest, and the Government loses some support from allies or the budget is usual Chidrambam types which markets find though good but don’t appear market friendly, sub-10000 is next level to look for.