Zee Ltd Positional target 220 & 200 CMP is 282 Resistance @ 300

Decending Triangle Pattern completion @ 121.8% retracement of Pole testing 280 level.

Formation of Double top @ 284 and expected reversal from current level for the target of 220 & 200

REFILE-POLL-Fed on track to taper in March; chances of Dec or Jan rise - RTRS 10-Dec-2013 02:38

(Repeats with correct link to data page)
Majority of 63 economists say March most likely for Fed taper Just less than half say earlier taper possible

By Yati Himatsingka
Dec 9 (Reuters) - The U.S. Federal Reserve will begin trimming its monthly asset purchases in March but some economists are warming up to the idea that it will do so as early as this month or at the January policy meeting, a Reuters poll showed on Monday.
Another month of strong U.S. hiring and an unexpected drop in the jobless rate reported on Friday prompted several economists to bring forward their expectations for when the Fed will begin paring back its $85 billion of monthly bond buying.
Nearly half, 29 of 63 economists, think the taper will happen in either December or January, before Janet Yellen is expected to take over from Ben Bernanke as chair of the Fed. Nine say it will happen at the U.S. central bank's Dec 17-18 meeting; 19 say in January, and one said either December or January.
In a poll taken just over two weeks ago, 16 of 62 economists were calling for a taper in January, and just three said December, with the rest saying March or later.
But the majority of economists polled, 33, still expect the Fed to start trimming its bond buying in March.
Out of 41 common contributors in both polls, 10 have now brought expectations forward. Six have pushed them ahead, while more than half, 25, have left their forecast unchanged.
World financial markets are on tenterhooks over when the Fed will taper. A decision to not cut back on bond buying in September lit a fire under many stock markets around the globe, and some have rallied to record highs.
"The recent employment data do increase the likelihood that the Fed could taper its asset purchases in December, but we believe the committee will continue to view declines in the unemployment rate as overstating the amount of improvement in labor markets," wrote economists at Barclays Capital.
And while most agree the job market is finally on the right track, there are plenty who think that inflation is not.
"The best argument for tapering is that it has to start sometime, but the low inflation trend is likely to lead policymakers to delay the initial tapering until March," said Scott Brown, chief economist with Raymond James in St. Petersburg, Florida.
The Fed has been buying long-term Treasuries and mortgage-backed securities over the past year in an attempt to keep borrowing costs low to put the economy on a path of sustainable growth and boost the jobs market.
Data on Friday showed firms hired more workers than expected in November and the jobless rate fell to a 5-year low of 7.0 percent. (Full Story)
A firm majority expect the Fed's current third round of asset purchases, called QE3, to end in the second half of 2014.
Consensus expectations for the size of the initial tapering were unchanged from the November 20 poll at $10 billion a month.
As in many of the past Reuters polls, a majority of respondents said the cutback would be evenly split between Treasuries and mortgage-backed securities. The rest thought the Fed would favor a larger cut in purchases of Treasuries.


(Reuters poll of primary dealers from Friday: FED/R)

Elliot Wave Pattern Formation in NIFTY on Closing basis in NIFTY Spot

Inverted Head & Shoulder and Elliot wave Graph on Bank Nifty

US30 - DAX 30 is on verge of Completion of Elliot wave pattern @ 9465 - 9500

Elliott Wave Theory was developed by R.N. Elliott and popularized by Robert Prechter. This theory asserts that crowd behavior ebbs and flows in clear trends. Based on this ebb and flow, Elliott identified a certain structure to price movements in the financial markets. The article serves as a basic introduction to Elliott Wave Theory. A basic 5-wave impulse sequence and 3-wave corrective sequence are explained. While Elliott Wave Theory gets much more complicated than this 5-3 combination, this article will only focus on the very basics.

There are two types of waves: impulse and corrective. Impulse waves move in the direction of the larger degree wave. When the larger degree wave is up, advancing waves are impulsive and declining waves are corrective. When the larger degree wave is down, impulse waves are down and corrective waves are up. Impulse waves, also called motive waves, move with the bigger trend or larger degree wave. Corrective waves move against the larger degree wave.

From the above chart US 30 has started its upside rally from the level of 7660$ and tested the level of 8460$ which was the starting of the Wave Theory and it was the I Wave. There after minor correction was seen from 8460$ to 8090$ in the form of wave II  which was just near to 50% retracement of wave I, there after it enter in wave III. Looking at the wave III it tested the higher level of 8770$ and it has retraced by 85% of wave I from the bottom of wave II, and exactly tested the higher level of 8770$ and started its correction in the form of wave IV. Wave IV retrace by 35% of wave I and tested the level of 8490 which was top of wave I and failed to trade below the same and reverted and confirming the wave V start. Currently it is in the continuation of the wave V and is near to the top level. If we calculate 121.8% retracement of wave I which is 800 points will bring the level of 9465 which is the expected top and reversal is expected from the higher level. On higher side 9500 will be the second resistance as its 161.8% expansion of wave A-B of the Symmetrical triangle. DE30 is nearing the strong resistance around 9465 to 9500 and we might look at sharp correction in DE30 soon, which might enter in corrective wave in form of a-b-c pattern.  On lower side support is seen at 9250 level and sustain trading below the same on weekly closing will confirm the down trend and any rise near the range of 9460 will be a good selling opportunity where advisable  stop to be placed at 9600 and wait for downtrend to continue. 

EURUSD Wedge pattern formation if 1.3700 holds then target 1.3000 - 1.3100

Implication: A Continuation Wedge (Bearish) is considered a bearish signal, indicating that the current downtrend may continue.

Description: A Continuation Wedge (Bearish) consists of two converging trend lines. The trend lines are slanted upward. Unlike the Triangles where the apex is pointed to the right, the apex of this pattern is slanted upwards at an angle. This is because prices edge steadily higher in a converging pattern i.e. there are higher highs and higher lows. A bearish signal occurs when prices break below the lower trendline.

Over the weeks or months that this pattern forms the trend appears upwards but the long-term range is still downward.

Trading Considerations

Pattern Duration: Consider the duration of the pattern and its relationship to your trading time horizons. The duration of the pattern is considered to be an indicator of the duration of the influence of this pattern. The longer the pattern the longer it will take for the price to move to the Target. The shorter the pattern the sooner the price move. If you are considering a short-term trading opportunity, look for a pattern with a short duration. If you are considering a longer-term trading opportunity, look for a pattern with a longer duration.

Target Price: The target price provides an important indication about the potential price move that this pattern indicates. Consider whether the target price for this pattern is sufficient to provide adequate returns after your costs (such as commissions) have been taken into account. A good rule of thumb is that the target price must indicate a potential return of greater than 5% before a pattern should be considered useful. However you must consider the current price and the volume of shares you intend to trade. Also, check that the target price has not already been achieved.

Criteria that Supports

Volume:  Volume should diminish as the pattern forms.

Criteria that Refutes:

Moving Average: The penetration of the 200-day Moving Average by the price is a false bull signal.

Rising or Stable Volume: Volume should diminish as the pattern forms. If volume remains the same or increases this signal is less reliable.

Underlying Behavior: In this pattern prices edge steadily higher in a converging pattern i.e. there are higher highs and higher lows indicating that bulls are winning over bears. However, at the breakout point the bears emerge the victors and the price descends.

EURUSD has given a confirm reversal from the higher level of 1.3620 and if today’s closing is seen below 1.3600 will strongly give the confirmation of the down side move where 1.3530 will be the immediate target which is the rising trend line. Short term support is expected to hold the level of 1.3530 and further sustain trading below 1.3530 will give a confirmation of down trend to continue. Height of the Pole is 530 pips (1.3830 – 1.3300 = 530) and if we take 50% as first target of the pole (530 * 50% = 265 pips) from the breakdown @ 1.3530 comes to 1.3265 level and second target comes to the level of 1.0300 (1.3530 – 530 pips = 1.3000 level). To be safer side we will expect target of 1.3100 level from the current level and on higher side weekly closing must not trade above 1.3650 level and as a stop if hold one can maintain short for the given target.

Marc Faber: China could spark a bigger crisis than in 2008 : November 8, 2013, 5:07 AM

An alarming credit boom in China could trigger a global financial crisis that would make the one in 2008 look mild by comparison, says old gloomy eyes, Marc Faber.

“If I am telling you that we had a credit crisis in 2008 because we had too much credit in the economy, then there is that much more credit as a percentage of the economy now,” the author of The Gloom, Boom & Doom Report told CNBC late Thursday. “So we are in a worse position than we were back then.”

China, in particular, has seen credit as a percentage of the economy jump 50% in the last four and a half years, said Faber, the “fastest credit growth you can image in the whole of Asia.”

He’s not alone in this China worry, as lots of economists have been warning about rapid credit growth there, even as officials are trying to curb it.

Meanwhile, Deutsche Bank strategist John-Paul Smith told clients on Wednesday that China’s growth model continues to be based on “ever-expanding debt, which leaves the country and financial markets very vulnerable to any potential loss of from investors and lenders.”

That’s even though China may change forever this weekend, as the Communist Party holds its Third Plenum, widely expected to introduce lots of reforms.

In his note, Smith says Deutsche Bank has had a pretty straightforward preference for developed over emerging markets the past three years. But that that now rests purely on its negative view of EM, rather than the “positive attractions of U.S. equities, which has become a consensus call”, he points out.

“The U.S. market now appears somewhat overvalued, and vulnerable over the medium term to a shift away from capital to labor from a fundamental perspective, but could be headed for bubble territory if the situation with China and commodities plays out as we anticipate,” he said.

Faber warns that China isn’t the only problem area. Other Asian countries are also seeing big jumps in household debt.

“Government debt has not gone up that much, but household debt has,” said Faber. “In Thailand, where I spend a lot of time, we have had no recession, but we have had no growth either. It’s the same in Singapore and Hong Kong.”

Nifty One pager report forming Bull Flag Pattern Formation Top

Trading Call: Sell at the level of 5250 CMP Target of 4500 - 3800 – 3200 – 2500 levels, Resistance is seen at 6400 Closing basis.

Nifty we look at positional chart from year 2002 onwards where it was trading at 900 levels from there the rally was started and slowly and steadily it tested the level of 6340 in year 2008 starting. In the same year we have seen a massive selling from the all time high and tested the lower level of 2500 looking at the crises in the market. It remain at this lower level of 2500 for 2008 year end and first quarter of 2009 and again market picked up a rally and tested all time high of 6340 but failed to cross the same where profit booking was seen. This profit booking from 6340 brought down to test the level of 4540 where value buying was seen which again brought to 6383 just above all time high on 3^rd November which was Sunday Diwali Mahurat trading where market were open in evening from 6 pm to 7.30 pm.

Looking at the chart it is forming Two Bull Flag Patter Formation tagged as Base 1 and Base 2.

Base 1:                  Bull flag pattern difference is 5440 points

Base level of flag is seen at 2500 Nifty any trade below 3000 or 2800 will be expected entry level as one should not wait for precisely 2500 Nifty.

Breakout of Bull Flag pattern is seen at 6300

Nifty is expected to test the target of 11600 levels in period of 10 years by 2024 – 2025.

Base 2:                  Bull flag pattern difference is 3800 points

Base level of flag is seen at 4500 Nifty

Breakout of Bull Flag pattern is seen at 6300

Nifty is expected to test the target at 10100 levels in period of 10 years by 2024 – 2025.

               

Nifty if we look at the Pattern formation its getting strong reversal from 6300 level of closing basis and if sustain trading is seen below 6100 will test it straight to test the next rock bottom support level of 4500 where previous 2011 December  bottom was seen and market reverted from the same level. If on weekly closing basis 4500 is sustain then might fall further where 3800 to 3200 is confirm and might also move to test the level of 2500 which was 2008 year end Bottom level. There is a high probability that market will take a small support at 4500 and a short range bound movement is seen but if the same is broken then 3000 to 2500 is nowhere in medium term. 

Bull Flag pattern Formation in $ Index Bottom Fishing..

Flag, Pennant (Continuation)

Flags and Pennants are short-term continuation patterns that mark a small consolidation before the previous move resumes. These patterns are usually preceded by a sharp advance or decline with heavy volume, and mark a mid-point of the move.

1.        Sharp Move: To be considered a continuation pattern, there should be evidence of a prior trend. Flags and pennants require evidence of a sharp advance or decline on heavy volume. These moves usually occur on heavy volume and can contain gaps. This move usually represents the first leg of a significant advance or decline and the flag/pennant is merely a pause.

2.        Flagpole: The flagpole is the distance from the first resistance or support break to the high or low of the flag/pennant. The sharp advance (or decline) that forms the flagpole should break a trend line or resistance/support level. A line extending up from this break to the high of the flag/pennant forms the flagpole.

3.        Flag: A flag is a small rectangle pattern that slopes against the previous trend. If the previous move was up, then the flag would slope down. If the move was down, then the flag would slope up. Because flags are usually too short in duration to actually have reaction highs and lows, the price action just needs to be contained within two parallel trend lines.

4.        Pennant: A pennant is a small symmetrical triangle that begins wide and converges as the pattern matures (like a cone). The slope is usually neutral. Sometimes there will not be specific reaction highs and lows from which to draw the trend lines and the price action should just be contained within the converging trend lines.

5.        Duration: Flags and pennants are short-term patterns that can last from 1 to 12 weeks. There is some debate on the timeframe and some consider 8 weeks to be pushing the limits for a reliable pattern. Ideally, these patterns will form between 1 and 4 weeks. Once a flag becomes more than 12 weeks old, it would be classified as a rectangle. A pennant more than 12 weeks old would turn into a symmetrical triangle. The reliability of patterns that fall between 8 and 12 weeks is debatable.

6.        Break: For a bullish flag or pennant, a break above resistance signals that the previous advance has resumed. For a bearish flag or pennant, a break below support signals that the previous decline has resumed.

7.        Volume: Volume should be heavy during the advance or decline that forms the flagpole. Heavy volume provides legitimacy for the sudden and sharp move that creates the flagpole. An expansion of volume on the resistance (support) break lends credence to the validity of the formation and the likelihood of continuation.

8.        Targets: The length of the flagpole can be applied to the resistance break or support break of the flag/pennant to estimate the advance or decline.

Even though flags and pennants are common formations, identification guidelines should not be taken lightly. It is important that flags and pennants are preceded by a sharp advance or decline. Without a sharp move, the reliability of the formation becomes questionable and trading could carry added risk. Look for volume confirmation on the initial move, consolidation and resumption to augment the robustness of pattern identification.

·         Sharp Move: After consolidating for three months, $index is near the support level of 78.9 and has give a sharp recovery and is trading near 80 level.  This is showing reversal sign as the candle formation is also showing reversal and strong buying.

·         Flagpole: The distance from the breakout at 73.4 to the flag's high at 84.6 formed the flagpole.

·         Flag: Price action was contained within two parallel trend lines that sloped down.

·         Duration: From a low at 78.55 to the breakout at 84.6 the flag formed over a 1 Year period.

·         Breakout: The first break above the flag's upper trend line occurred without an expansion of volume. However, the $ index

·         Targets: The length of the flagpole measured 10 points and was applied to the resistance breakout at 84.6 to project a target of  

 95.25.

One Pager on GBPUSD

Principle of Elliot wave explained

Basic Sequence

There are two types of waves: impulse and corrective. Impulse waves move in the direction of the larger degree wave. When the larger degree wave is up, advancing waves are impulsive and declining waves are corrective. When the larger degree wave is down, impulse waves are down and corrective waves are up. Impulse waves, also called motive waves, move with the bigger trend or larger degree wave. Corrective waves move against the larger degree wave.

Three Guidelines

There are numerous guidelines, but this article will focus on three key guidelines. In contrast to rules, guidelines should hold true most of the time, not necessarily all of the time.

Guideline 1: When Wave 3 is the longest impulse wave, Wave 5 will approximately equal Wave 1.

Guideline 2: The forms for Wave 2 and Wave 4 will alternate. If Wave 2 is a sharp correction, Wave 4 will be a flat correction. If Wave 2 is flat, Wave 4 will be sharp.

Guideline 3: After a 5-wave impulse advance, corrections (abc) usually end in the area of prior Wave 4 lows.

Three Rules

Believe it or not, there are only three rules when it comes to interpreting Elliott Wave. There are many guidelines, but only three HARD rules. These are unbreakable. Guidelines, on the other hand, are bendable and subject to interpretation. Furthermore, these rules only apply to a 5-wave impulse sequence. Correction, which are much more complicated, are given more leeway when it comes to interpretation.

Rule 1: Wave 2 cannot retrace more than 100% of Wave 1.

Rule 2: Wave 3 can never be the shortest of the three impulse waves.

Rule 3: Wave 4 can never overlap Wave 1.

Corrective wave of expected move

Wave B

Usually 50% of Wave A Should not exceed 75% of Wave A

Wave C

either 1 x Wave A or 1.62 x Wave A or 2.62 x Wave A

Wave A is expected to test the level of 1.5670 which is 161.8% retracement of 1.6260 to 1.5890 and also the top of wave III where short term support is seen and will enter in wave B as a profit booking. According to the above rule we can expect 50% retracement of the fall from 1.6255 to 1.5670 = 0.0585 / 2 = 0.0292 points. From the bottom of 1.5670 50% rise can test 1.5962 level and this is expected to be the top of wave B and will enter in wave C again in the corrective wave. We can expect wave C to fall either by 100% or b 161.8% wave A, calculating 100% fall after wave B will bring to 1.5377 as initial target and then further if we take 161.8% fall from wave B will bring to 1.5020 level on lower side. 

EURUSD Wedge Pattern Formation

Implication: A Continuation Wedge (Bearish) is considered a bearish signal, indicating that the current downtrend may continue.

Description: A Continuation Wedge (Bearish) consists of two converging trend lines. The trend lines are slanted upward. Unlike the Triangles where the apex is pointed to the right, the apex of this pattern is slanted upwards at an angle. This is because prices edge steadily higher in a converging pattern i.e. there are higher highs and higher lows. A bearish signal occurs when prices break below the lower trendline.

Over the weeks or months that this pattern forms the trend appears upwards but the long-term range is still downward.

Trading Considerations

Pattern Duration: Consider the duration of the pattern and its relationship to your trading time horizons. The duration of the pattern is considered to be an indicator of the duration of the influence of this pattern. The longer the pattern the longer it will take for the price to move to the Target. The shorter the pattern the sooner the price move. If you are considering a short-term trading opportunity, look for a pattern with a short duration. If you are considering a longer-term trading opportunity, look for a pattern with a longer duration.

Target Price: The target price provides an important indication about the potential price move that this pattern indicates. Consider whether the target price for this pattern is sufficient to provide adequate returns after your costs (such as commissions) have been taken into account. A good rule of thumb is that the target price must indicate a potential return of greater than 5% before a pattern should be considered useful. However you must consider the current price and the volume of shares you intend to trade. Also, check that the target price has not already been achieved.

Criteria that Supports

Volume:  Volume should diminish as the pattern forms.

Criteria that Refutes:

Moving Average: The penetration of the 200-day Moving Average by the price is a false bull signal.

Rising or Stable Volume: Volume should diminish as the pattern forms. If volume remains the same or increases this signal is less reliable.

Underlying Behavior: In this pattern prices edge steadily higher in a converging pattern i.e. there are higher highs and higher lows indicating that bulls are winning over bears. However, at the breakout point the bears emerge the victors and the price descends.

EURUSD has given a confirm reversal from the higher level of 1.3830 and on weekly basis piercing pattern has been formed and if today’s closing is seen below 1.3650 will strongly give the confirmation of the down side move where 1.3150 will be the immediate target which is the rising trend line. Short term support is expected to hold the level of 1.3100 and further sustain trading below 1.3100 will give a confirmation of down trend to continue. Height of the Pole is 2900 pips (1.4940 – 1.2040 = 0.2900) and if we take 50% as first target of the pole (0.2900 * 50% = 0.1450 pips) from the breakdown @ 1.3200 comes to 1.1750 level and second target comes to the level of 1.0300 (1.3200 – 0.2900 = 1.0300 level). To be safer side we will expect target of 1.1750 level from the current level and on higher side weekly closing must not trade above 1.4000 level and as a stop if hold one can maintain short for the given target. 

FM is building forex reserves with debt by R Jagannathan Oct 23, 2013

Stupid, stupider: FM is building forex reserves with debt by R Jagannathan Oct 23, 2013 #Chidambaram #Elections #External debt #forex reserves #Indian rupee #Sovereign Debt #Sovereign wealth funds #UPA 3802 22 


After much loose talk about creating a sovereign wealth fund, the massive walloping the rupee got after May this year appears to have sobered down the UPA government. But not enough, it seems. It is now heading full-speed in the opposite direction – towards an even more ruinous idea, what we can call a string of sovereign debt funds. With over $400 billion in foreign debt, and over $170 billion of it due for repayment over the next six months by March 2014, the government surely needs more dollars in the kitty to reassure the foreign exchange markets. Few dollars in the till means the rupee will again take running leap from the Qutb Minar. However, the right answer to the problem of the current account deficit (CAD) is not to try and build a forex kitty with borrowings from abroad, especially to prop up the rupee. It is to let the rupee find its own level, and use the currency weakness to build exports and compress imports. The sovereign debt funding initiated through the backdoor is a recipe for medium term disaster – but in election season, this is not what Chidambaram sees. According to The Economic Times, the finance ministry is planning to take the wrong road to CAD nirvana. It wants to take up the foreign exchange reserves from around $250 billion now to nearly $300 billion by December-end, largely by borrowings. The report quotes a finance ministry official as saying “the effort is to build a forex kitty” so that it is well-prepared when the US Fed starts tapering down it $85 billion monthly bond purchases from early next year. The Reserve Bank of India (RBI) and the finance ministry have unveiled an unstated sovereign debt fund(s) plan in stages since August-September this year. These are some of the elements. #1: Free ride to banks on dollar deposits. Soon after he took over as RBI Governor, Raghuram Rajan offered banks dollar-rupee swaps on fresh three-year (or longer tenure) non-resident dollar deposits at the concessional rate of 3.5 percent. He also allowed banks to raise rupee-dollar swaps on overseas loans at rates that are 1 percent below the current market swap rate. #2: Arm-twist public sector units to borrow in dollars. Three months ago, Finance Minister P Chidambaram announced that the idea of asking profitable public sector units to raise dollar loans – i.e. quasi sovereign bond issues – was “on the table.” So far, barring banks, few PSUs have offered to put their necks on the chopping block, but one can’t rule it out if the idea is to build a $300 billion kitty by December-end. We are just two months from that deadline. #3: Lobby the global bond index builders to include rupee bonds. Fund managers globally tend to invest in sovereign debt based on their index weights. India has been talking to JP Morgan and others to get rupee bonds onto their indices. If this happens, the government is hoping that $20-40 billion will flow in over 12 months. In short, what the government is really doing is to try and build forex reserves by borrowing – a clandestine string of sovereign debt funds raised by public sector banks and institutions. It is highly imprudent, and damaging in the medium term. It’s like borrowing on your credit card and putting all the money in a fixed deposit to show you have big money in the bank. Some people will be fooled, but not all. It is also damaging to the real miracle that has begun happenings on the external front, and especially on the CAD front due to the fall in the rupee. If the rupee has strengthened from 69 to the dollar to just over Rs 61 now, it is because exports are picking up and imports are being compressed naturally. Mr Market, as we noted earlier, is fixing our external problems bit by bit. The moves to artificially arrange a forex hoard of $300 billion will dampen this gradually improving scenario since the rupee will then rise artificially if dollar inflows build up, making imports cheaper and exports more difficult. The real change on CAD will then be halted in its tracks. Why would a finance minister do this? That is, hamper real improvements on the external front by artificially propping up reserves and the rupee? The only answer is the election time-table. Hence the December deadline to build forex reserves. A strong rupee will help bring down imported inflation and the fiscal deficit by making oil subsidies lower. Oil subsidies are the biggest boosters for inflation, and the subsidy bill this year will cost the exchequer nearly Rs 1,40,000-1,50,000 crore. Unless the rupee strengthens. With food inflation running high despite a bountiful monsoon, runaway oil prices will make matters worse. This is why the finance ministry is choosing to push the rupee up even while claiming it is not targeting any price for the rupee. The sovereign debt funding initiated through the backdoor is a recipe for medium term disaster – but in election season, this is not what Chidambaram sees.  

Read more at: http://www.firstpost.com/business/stupid-stupider-fm-is-building-forex-reserves-with-debt-1188757.html?utm_source=ref_article

India has to repay $172 billion debt by March 2014

Burden triples in six years; outflow will deplete 60 % of forex reserves

The U.S. Federal Reserve’s hint that it could roll back its cumulative easy money policy seems to have suddenly increased India’s vulnerability to slowing capital flows in the near future.

In this context, India’s short-term debt maturing within a year would seem to be a matter of concern against the current backdrop of the declining rupee and the U.S. Fed’s possible change of stance on easy liquidity in future.

Short-term debt maturing within a year is considered by experts as a real index of a country’s vulnerability on the debt-servicing front. It is the sum of actual short-term debt with one-year maturity and longer-term debt maturing within the same year.

India’s short-term debt maturing within a year stood at $172 billion end-March 2013. This means the country will have to pay back $172 billion by March 31, 2014. The corresponding figure in March 2008 — before the global financial meltdown that year — was just $54.7 billion. India has accumulated a huge short-term debt with residual maturity of one year after 2008. The figure has gone up over three times largely because this period also coincided with the unprecedented widening of the current account deficit from roughly 2.5 percent in 2008-09 to nearly 5 per cent in 2012-13. Much of this expanded CAD has been funded by debt flows.

This may turn into a vicious cycle.

More pertinently, short-term debt maturing within a year is now nearly 60 per cent of India’s total foreign exchange reserves. In March 2008, it was only 17 per cent of total forex reserves. This shows the actual increase in the country’s repayment vulnerability since 2008.

Theoretically, if capital flows were to dry up due to some unforeseen events and NRIs stopped renewing their deposits with India, then 60 per cent of the country’s forex reserves may have to be deployed to pay back foreign borrowings due within a year.

A lot of the surge in external debt maturing within the next year is on account of big borrowings by Indian corporates during the boom years after 2004. Corporates became quite heady from their initial growth success and stocked up on huge external debts of 5- to 7-years maturity. The repayment clock is ticking for many of them now.

External commercial borrowings are now 31 per cent of the country’s total external debt of $390 billion as of 31 March 2013. Short-term debt with one year maturity is 25 per cent of total external debt. However, total short term debt to be paid back by the end of this fiscal, which includes a lot of corporate borrowings payable by end March 2014, is 44 per cent of the country’s external debt or $172 billion.

Corporates have managed to roll over their foreign borrowings over the past year because of the easy liquidity conditions kept by the U.S. Federal Reserve. But if the Fed’s easy liquidity stance were to reverse, there is no knowing how Indian corporates will pay back their foreign debt at a depreciated exchange rate of the rupee.

In any case, besides meeting its debt repayment obligation of $172 billion by 31 March 2014, India needs another $90 billion of net capital flows to meet its current account deficit projected at 4.7 per cent of GDP by the Prime Minister’s Economic Advisory Council (PMEAC) for the coming fiscal.

The chairman of the PMEAC, C. Rangarajan, told The Hindu that an otherwise manageable CAD may create a perception of vulnerability in the backdrop of the Fed’s latest stance.

The $172 billion that has to be paid back by March 31, 2014, will no doubt add to this growing sense of unease.

BUSINESS » ECONOMY

NEW DELHI, June 29, 2013

Updated: June 29, 2013 01:49 IST  

USDINR Falling Wedge (Reversal) Uptrend after crossover above 61.7 per$ in spot market.

USDINR Falling Wedge (Reversal)

The Falling Wedge is a bullish pattern that begins wide at the top and contracts as prices move lower. This price action forms a cone that slopes down as the reaction highs and reaction lows converge. In contrast to symmetrical triangles, which have no definitive slope and no bias, falling wedges definitely slope down and have a bullish bias. However, this bullish bias cannot be realized until a resistance breakout.

The falling wedge can also fit into the continuation category. As a continuation pattern, the falling wedge will still slope down, but the slope will be against the prevailing uptrend. As a reversal pattern, the falling wedge slopes down and with the prevailing trend. Regardless of the type (reversal or continuation), falling wedges are regarded as bullish patterns.

1.        Prior Trend: To qualify as a reversal pattern, there must be a prior trend to reverse. Ideally, the falling wedge will form after an extended downtrend and mark the final low. The pattern usually forms over a 3-6 month period and the preceding downtrend should be at least 3 months old.

2.        Upper Resistance Line: It takes at least two reaction highs to form the upper resistance line, ideally three. Each reaction high should be lower than the previous highs.

3.        Lower Support Line: At least two reaction lows are required to form the lower support line. Each reaction low should be lower than the previous lows.

4.        Contraction: The upper resistance line and lower support line converge to form a cone as the pattern matures. The reaction lows still penetrate the previous lows, but this penetration becomes shallower. Shallower lows indicate a decrease in selling pressure and create a lower support line with less negative slope than the upper resistance line.

5.        Resistance Break: Bullish confirmation of the pattern does not come until the resistance line is broken in convincing fashion. It is sometimes prudent to wait for a break above the previous reaction high for further confirmation. Once resistance is broken, there can sometimes be a correction to test the newfound support level.

6.        Volume: While volume is not particularly important on rising wedges, it is an essential ingredient to confirm a falling wedge breakout. Without an expansion of volume, the breakout will lack conviction and be vulnerable to failure.

As with rising wedges, the falling wedge can be one of the most difficult chart patterns to accurately recognize and trade. When lower highs and lower lows form, as in a falling wedge, a security remains in a downtrend. The falling wedge is designed to spot a decrease in downside momentum and alert technicians to a potential trend reversal. Even though selling pressure may be diminishing, demand does not win out until resistance is broken. As with most patterns, it is important to wait for a breakout and combine other aspects of technical analysis to confirm signals.