N Jaykumar of Prime Securities.........

Friends,
N Jaykumar of Prime sec is one speaker at CNBC whom I try to read or hear..
He has his view and not talk with a prejudice mind.
Last Saturday I read him at money control site along with Adrew Holland.

One reply to a question asked to him has interested me a lot.
I am pasting here for readers and make their own judgement as I am not a person whose opinion should be read or discussed…..

Read on:
Q: If indeed we are in a bearish kind of market, do you think we will go back to those 10-12 kind of PE multiples where we typically have bottomed out in the past? is it conceivable?

Jayakumar: Something needs to happen to make money reflow into these markets. While we painted seriously gloomy picture right through is that if you go back to participatory note (P-Note) writers-the big bulge bracket firms -virtually everybody will tell you that almost every single holding in any of the stocks has been lent out to be shorted. So virtually there is no borrowing available for somebody to borrow and short in the Indian markets. From that perspective, today you can actually argue that there is no incentive for the short to cover.

Having said that, at some point in time since the gains are reasonably recent, the shorts will have to start covering. So one bout of short covering and I am not sure which broking house would actually put out the thing seeing that USD 7 billion of stock has been borrowed and shorted. As those numbers are right and long only funds also come in, the upward pressure on the short covering itself could actually sees reasonably large size rallies.

The other thing is that India has fallen significantly more than most markets. Now just to look at the Dow or the European markets fall, I think makes for no sense whatsoever. Today we have fallen 3 times of Dow; the Dow is probably down 11%-13%; for the year we are down 35%. In that environment therefore, we will find reasons to bottom out nothing else for short covering reasons. Secondly, interest rates keep going up; maybe there is a squeeze in the commodity markets and the unwinding thereof. If these things happen - of course what is keeping a lead in all this is just like momentum drove us on the way up, there is a reverse momentum in some of the funds etc especially the hedge funds which are facing not just redemptions but lot of performance problems and if those problems translate into a greater squeeze, I think you are going to have maybe the capitulation-selling which you are seeing is happening in a sense in the markets.

So I think a lot of this has been because of the capitulation - a lot of it may have already happened especially the size of the short covering, which I think can potentially happen whenever it does. I do not know if it goes to 10-12 multiples. I had a bottom that was much higher than where we are today. But given whatever, this 13,500-14,000 could actually hold despite all the negatives and maybe we break down from there and maybe it tests a little lower. But I suspect in those range, it is conceivable - when you overshoot, it would actually go down to 12,500-13,000. But I would be very surprised if we did.


My comments:
If the figures are true of $7 bn borrowed stocks are shorted.........and has to be given back.....to the lenders and if Bears are breaking the prices with LOW VOLUMNES, then what will happen when crude will tank....and inflation willcome down as Inflation is related with the crude prices......
This means that when covering takes place then $7 bn worth of stocks borrowed are to be bought from the market and should be given back to the lenders.....A real buying will come.....which will be far far bigger then the actual selling of FII's of $5 bn...
Please take my view as a pinch of salt as I am accused of misguiding readers....