by Krsna Khandelwal-A Stock Market Vedic Theory Proponent
The upsurge in NIFTY/SENSEX seems to be result of some aggressive buying, but the forces are at work, which would give tough times for the investors interested to make a quick buck. Actually the most important point to consider is that although the interest rates else where in the world are not under pressure to move up, they are not stopping to move up in our domestic market. This phenomenon may be explained in a way that there is an appetite (latent appetite) which had been building up when the rates were down to such an extent that the Indian entrepreneurial class was all too tempted to go ahead and undertake projects at good speed. There was a catch however, that the domestic R & D activity had yet not been developed to an extent of providing the know-how to cost effectively produce the items in vogue and use. Also for the ordinary service sector, activity could not be organized without going for the foreign tie up, as the scales had to be phenomenally large like in case of retail chains. The only sector that the Indians were bold about was the realty sector and we indeed saw them getting over each other to grab the pie without even realizing that this also has to be properly organized. The result was that some people and a few investors along with them had their fingers burnt.
With passage of time the plans have come to get finalized but the pool of money which was full to brim seems to have dried to a great extent and the stream sourcing in foreign land is not delivering enough to fill the pool as the interest rates have been raised by the daddy of all banks (the US Federal Bank) in a series of hikes.What to make out of this is a simple equation that the money has to be raised domestically through IPO at the prices most reasonable and leaving room to appreciation in short term. The investors have to be weaned away from the more realistic level of investing in secondary market. Actually, the greed of Indian entrepreneurs has become so ingrained that they have not yet reconciled to the fact of equitably sharing the fruits of taking risks along with the disorganized masses i.e. their sleeping partners. Here comes the need to administer the morality dose in to veins of the heretofore not very clean Indian business class. One may see the the manner of conceiving the amalgamation/takeover of SAHARA by JET and then eventual falling out.
In case the shareholder’s interest had been kept in mind, it may not have been possible for the one who is being termed as friend of ‘D’ to have possibly made a cool chunk of money through purchase and sale of shares. I have given the analogy; the people with discretion may understand rest.
Hari Om
23 June 2006
Nifty corrected by 1.91 % to close at 2861.This correction came about because of global markets turning weaker. I think the global markets’ will have reduced impact on Indian markets as there is not much room in Indian markets to go down any further and therefore the Indian markets will get delinked with the global markets. The point to ponder is that the Prithvi Tattva (the capacity of a company to produce and generate turnover) for the Indian corporates would improve over time
In addition, the correction has dampened the over enthusiasm and has not dented the basic strength of economy. With every passing day, the new capacities are going to be added, as the PAT margins are still higher than the G-Sec yield for long term. The caution over time will turn in to hope very soon. The scope of changes in mood of economy is the most subtle of the Tattvas and has been termed as ‘Akash’ and this is limited by the range of price change possibilities. It is at its almost lowest point so the weakness on this account is not going to come. In light of above, commit your investible funds to equities whenever there is any sudden drop in levels in market and keep courage. The possibilities presented by rest of the ‘Tattva’ will be discussed some time later.
Hari Om
20 june 2006
The Nifty demonstrated that it will not allow excesses on either side and closed the week with slight gains. I may remind you that the range of 2700 to 2900 seems to be limiting for Nifty for up to the time when the quarterly results would be out. The Nifty has been given support by IT sector scrips in beautiful way and the key lies in the fact that the dearer interest rates do not adversely affect IT companies, which not only finance their own expansion but also are sitting on cash. This has made them less vulnerable but at the same time please be warned that the smart money is moving out continuously and this sector will not be well placed for long term rewards.
I have talked about the effect of interest rates on indices, which keeps them in vice like grip. There is empirical evidence in hand now. I invite you to carefully understand the numbers and the relation ship they have .The inflation was about 2% in Jan 02 and G-Sec Yield was around 8% meaning real rate of interest @6%.BY 2003 beginning the inflation moved up to 4 to 6% range and remained so till end of 2005.During 2003 ,2004and 2005 the interest on G-Sec came down and remained in the range of 4 to 6% and there after started to move up and is presently placed at around 8%.The inflation stands at 4.72% for the week ending 17 June 06.Juxtaposing these numbers with the march of indices, we clearly see the corelation.While in 2002 the markets were down and flat, they kept touching newer heights all the while during 2003,2004 and 2005 because the inflation and interest rates were almost at par and the real rate of interest was almost nil.
Suddenly, the over enthusiasm tried to keep the indices at higher level but had to give way and the six months after 2005 have remained in turmoil on account of ignoring the opposite movement in inflation and interest rates signifying that real rates of interest have gone up. Here I may add that the domestic interest rates and inflation rates have higher bearing than the FII money movement in the medium term, as this movement is the result of expected corporate performance, which in turn is mostly based on the real rates of interest.
The fact of higher real rate of interest may dent the profitability of corporates but it shall not affect the well-managed companies to raise capacities and improving upon the level of efficiencies in operations. The case of Tata Steel is a good example. It suffered in monetary terms in the intermediate year but at the same time kept adding to capacities and kept cutting the costs and then came the good times and see how handsomely the investors have been rewarded during last four years. We have to look for such companies but we have to look at the price we pay as I keep saying that even gold may be bought too dear. To identify more such companies, here comes the need to use the Stock Market Vedic Theory based on Panch Tattva. For this, you should check our daily advice.
Hari Om
18 June 2006
